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Q1 Trends in Regulatory Actions

The latest Banking Compliance Index (BCI) quarterly report was released on Tuesday by Continuity, and it showed that Q1 2019 was the third consecutive quarter where more than 50% of enforcement actions were taken against bank officers and directors, rather than financial institutions.

The BCI measures the incremental cost burden on financial institutions to keep up with regulatory changes. BCI data sources include the CFPB, FDIC, the Fed, the National Credit Union Administration, and the Office of the Comptroller of the Currency. The BCI is calculated using an average size institution of $350 million. Key indicators include volume, velocity and complexity of regulatory change; time expended to meet regulatory requirement(s); and supervision and the enforcement climate.

“This quarter’s regulatory activity was in line with what we saw in the two preceding first quarters, so we’re starting to identify what is typical in this pro-business administration,” said Pam Perdue, Continuity’s Chief Regulatory Officer. “Even though regulatory change still consumes considerable human and financial resources, the pace of new regulation has slightly leveled off. Now is the time for institutions to capitalize on this trend and take advantage of this opportunity to approach compliance management intentionally and strategically instead of merely reacting to changes.”

Despite the increase in enforcement actions, the report found that 62 issuances were delivered in Q1 2019, which is a drop from 81 in Q3 of 2019. Compliance costs fell from $23,608 in the last quarter of 2018 to $15,439 in Q1 2019, and hours required to comply per institution went from 462 to 305 in Q1 of 2019, a 34% decline.

“With several major rules taking effect this spring and summer, including the Prepaid Accounts rule, Private Flood Insurance, and Payday Lending, banks and credit unions should get ready for another hectic season,” said Donna Cameron, Continuity’s Director of Regulatory I/O.

This trend mirrors cyclical patterns in compliance operations but may differ from patterns observed in loan growth or account opening.

The new trend, however, does not reflect the new BCI of .76, which indicates that financial institutions need less than one full-time employee to keep pace with regulatory changes. The latest BCI rate is a 27% decline from the 1.11 rate reported in Q4 of 2018.

This is also the first time the BCI rate has fallen below 1 since Q1 2018 when the BCI was 0.67. Previous BCI rates have been 1.04 (Q4 2018), 1.05 (Q3 2018), and 1.11 (Q2 2018).

About Author: Mike Albanese

Mike Albanese is a reporter for DS News and MReport. He is a University of Alabama graduate with a degree in journalism and a minor in communications. He has worked for publications—both print and online—covering numerous beats. A Connecticut native, Albanese currently resides in Lewisville.
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