October 15, 2014 - The concern U.S. banks and credit unions have over managing compliance and risk is up nearly 30 percent from almost two years ago, according to the latest Regulatory & Risk Management Indicator issued today by Wolters Kluwer Financial Services, a comprehensive provider of risk management, compliance, finance and audit solutions and services.
The Indicator began with a baseline score of 100 in January 2013, when Wolters Kluwer Financial Services surveyed nearly 400 U.S. banks and credit unions around their ability to manage compliance obligations and risk. It has risen to a score of 128 following the company's latest survey of more than 300 financial institutions in August.
From a compliance standpoint, 72% cited ongoing challenges in complying with changing regulations. Concern over the Consumer Financial Protection Bureau's Truth in Lending Act/Real Estate Settlement Protection Act requirements remained high, with three quarters of respondents noting it as a significant challenge.
An area of increasing unease is in the CFPB's new Home Mortgage Disclosure Act reporting requirements, having risen steadily from 45% to 63% between January 2013 and August 2014. In the most recent survey, respondents cited specific concern over the sizeable new set of data fields, the challenges of accurately populating those fields, and updating their own institutions' technology systems to handle the changes.
Overall concern over ability to manage risk has grown, with 44% of respondents citing regulatory pressures as a main obstacle in managing risk at the organizational level. Sixty-three percent cited regulatory risk as their top risk concern, followed by IT risk (45%), fair lending risk (38%), and fraud (36%). In addition, fewer than one in five respondents characterized their organizations as having a comprehensive, strategic enterprise risk management program in place. Another one in five indicated that they understand and manage risks, but have no formal process or program in place. The remainder were either somewhere in between these extremes (44%) or "not sure" (16%).
As banks and credit unions are faced with increasing regulatory and risk management challenges, the ability to meet them with existing resources has also been tested. One in three respondents indicated they have hired staff or transferred staff from revenue-generating roles to help manage growing risk and compliance requirements in the past 12 months.
"Clearly, banks and credit unions are feeling increased pressure on their ability to comply with regulatory requirements and appropriately manage risk," said Tim Burniston, vice president and senior director of Wolters Kluwer Financial Services' Risk & Compliance Consulting Practice. "The survey results provide a compelling argument for continued investment in systems and approaches financial institutions can employ to address these mounting regulatory and risk obligations."
To calculate the Regulatory & Risk Management 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.
