Regulatory Change Accelerates, Q3 Ends with Seven Changes in Last Ten Days

by PaymentsJournal 0

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Uncertainty is over as new regs and enforcement actions return to 2015 levels

NEW HAVEN, Conn., Oct. 24, 2017 (GLOBE NEWSWIRE) — Continuity, a provider of automated compliance management technology for financial institutions, announces its third quarter Banking Compliance Index (BCI). This quarter’s data indicates a return to business as usual after a brief period of low regulatory activity in the first half of 2017, likely related to the uncertainties of a new administration following a typical election-year cycle.

The increase in regulatory burden from Q2 persisted and escalated during Q3.  While regulatory changes held steady (with a minor drop of two fewer issuances in Q3 than Q2), regulatory page counts nearly doubled, to 2692 pages, and enforcement actions issued were on par with levels seen in Q3 2016.  Given that the fourth quarter of the calendar year is typically the busiest as far as new regulation is concerned, any hopes for an easing of regulatory burden under a Trump administration seem to have been short-lived.

This quarter’s BCI rose to 1.27—with a 63 percent increase in the number of hours required to analyze and implement new regulations over the prior quarter. The cost of compliance activities across the typical $350M financial institution grew more than 60%, rising to $22,225 compared to $13,925 in the quarter before.

The BCI indicates these changes were accompanied by an uptick in enforcement actions as well, as 97 actions were taken by regulators during the quarter. This accelerated the enforcement rate one full point over the first quarter figure, to 6.7 percent. This rise in enforcement actions matches the Q3 2016 level.

“First quarter slowdown is a pattern commonly seen after most presidential elections,” said Pam Perdue, EVP and Chief Regulatory Officer of Continuity. “Three-fourths of the way through the year, we are now seeing a higher rate of enforcement actions, in addition to many new regulations—all signs that the industry is back to business as usual. While reg reform is gaining traction, the legislative process takes time, and in the meanwhile, bankers still have to comply with what’s already in place.”

Contributing to the increased burden in Q3 were additional HMDA amendments (and related changes to CRA and ECOA), final TRID amendments, and issuance of the CFPB’s arbitration agreements rule. Together, these rules total almost 1700 pages. Added to that were 13 new proposals and the announcements of “more to come,” including proposals on capital simplification and another amendment to the mortgage servicing rules. Comment periods have closed on proposed changes to the TRID rule, appraisal thresholds, and the NCUA’s emergency mergers and NCUSIF distribution rules, meaning that final rules can be anticipated.

On top of the 1700 pages of new rules to read, analyze and implement, financial institutions continue to be hard at work preparing for the HMDA amendments effective in January, the arbitration agreements rule in March, prepaid accounts and phase 2 of the mortgage servicing amendments in April, and the new CDD/beneficial ownership rule in May.

As is historically the case, Q4 has started with a bang, with 13 new issuances in the first 10 business days of October, including the final payday lending rule (at almost 1700 pages).

“We can expect to see a fairly sustained level of regulatory activity now that the industry has adjusted to the new administration,” explained Continuity Director of Regulatory I/O Donna Cameron. “With many new regulations expected in Q4 and a return to 2015 levels in Q3, the industry must begin taking proactive measures to ensure a robust compliance management system is in place, instead of taking a reactive, labor-intensive approach to the growing volume of new regulations.”

It’s apparent that hopes for a slowdown in regulatory change are over. The ongoing burden of keeping up is increasing, and the only way to effectively handle it is with a CMS that provides consistent, repeatable processes that can be implemented no matter what Washington does next.

About the Banking Compliance Index™

The Banking Compliance Index™ (BCI) is a quarterly tracking index published by Continuity’s Regulatory Operations Center®. It measures the incremental cost burden on financial institutions to keep up with regulatory changes.

The BCI is calculated each quarter using a multivariate analysis that can be weighted across different contexts and is calibrated to determine the regulatory impact on financial institutions of varying sizes, product mixes, and regulatory oversight. Key indicators include volume, velocity and complexity of regulatory change; time expended to meet regulatory requirement(s); and supervision and the enforcement climate. The BCI data sources include CFPB, FDIC, FED, NCUA and OCC. The BCI is calculated using an average size institution of $350 million.

  • Regulatory Changes: A total count of applicable financial regulatory changes throughout the quarter.
  • Page Volume: The number of pages associated with each of the regulatory changes—indicative of the complexity and workload involved with reviewing and interpreting each change.
  • Enforcement Action Information (EA): Analysis of the public enforcement actions that have been issued during a quarter.
  • The BCI employs a data-driven approach to provide unique insights into the depth and breadth of regulatory compliance workload impact measured in terms of a Full-time Employee (FTE) Consumption Score.

More than 830 financial institution professionals registered for the Continuity RegAdvisor® Quarterly Briefing webcast on Thursday, October 12. During this session, regulatory experts Pamela Purdue and Donna Cameron reviewed the Q3 2017 BCI metrics and provided in-depth information on the quarter’s regulatory changes, a workload assessment of these changes and the required actions to avoid penalties. A recording of this session is available here.

About Continuity

New Haven, Connecticut-based Continuity is a provider of regulatory technology (RegTech) solutions that automate compliance management for financial institutions of all sizes. By combining regulatory expertise and cloud technology, Continuity provides a proven way to reduce regulatory burden and mitigate compliance risk at a fraction of the cost. Our solutions are designed to automate all aspects of compliance management, from interpretation of regulatory issuances through intuitive task delegation, vendor management, and board reporting. Continuity serves hundreds of institutions across the United States and its territories. For more information about Continuity, visit

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