June 19, 2013 - U.S. banks and credit unions are feeling even greater regulatory and risk management pressures than they were at the start of 2013. That's according to the results of the first Regulatory & Risk Management Indicator conducted by Wolters Kluwer Financial Services, a comprehensive provider of compliance, risk management, finance and audit solutions and services.

The Indicator, which started with a baseline score of 100 in January when Wolters Kluwer Financial Services surveyed nearly 400 U.S. banks and credit unions, rose to a score of 136 when more than 430 respondents provided their feedback at the end of April. To calculate the Indicator, Wolters Kluwer Financial Services uses 10 main factors, seven of which revolve around direct input from banks and credit unions on their top compliance and risk management concerns and three of which are based on regulatory data the company compiles.

Among these ten factors, four significantly drove the increase in the overall Indicator score. They include the:

• Number of new federal banking regulations;
• Rising dollar amount of regulatory fines;
• Growing amount of resources needed by banks and credit unions to meet regulatory requirements; and
• Challenges facing financial institutions’ senior leadership in managing and controlling risk.

Concern over the ability to comply with regulatory requirements and prove compliance to regulators were two significant factors for the largest institutions participating in the Indicator—those with more than $7.5 billion in assets. These banks and credit unions were also much more likely to have hired additional compliance and risk management professionals in 2013 than smaller institutions, with more than 60 percent saying they had done so.

In addition, Wolters Kluwer Financial Services Regulatory & Risk Management Indicator offers a greater level of information and insight on institutions’ foremost compliance and risk management challenges.

For instance, from a compliance standpoint, the Indicator shows that majority of banks and credit unions are most concerned with the Consumer Financial Protection Bureau’s newly combined RESPA/TILA disclosure (59%), as well as its recently issued mortgage servicing rules (53%) and Qualified Residential Mortgage and Qualified Mortgage requirements (51%). However, the largest institutions are far more concerned with Unfair Deceptive and Abusive Acts and Practices standards (55%) and managing other regulatory risks in general versus specific requirements.

“The Indicator, which is a combination of our industry data analysis and insight as well as bank and credit union input, provides a barometer around the current state of the overall regulatory and risk management environment within the financial services industry,” said Timothy Burniston, vice president and senior director of Wolters Kluwer Financial Services’ Risk & Compliance Consulting Practice. “It’s apparent from this first reading that banks and credit unions are more increasingly concerned with managing the growing amount of regulatory change on the horizon. They’re also looking to their executive teams and Boards to play a more significant role in helping to mitigate and control the many regulatory and operational risks they face on a daily basis.”