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A survey of lending institutions conducted in January reveals—unsurprisingly—they’re carrying much heavier regulatory and risk management burdens than they were at the beginning of 2013, thanks in large part to heavy resource investments toward compliance and concerns about steep fines from regulators.
Financial services solutions firm Wolters Kluwer Financial Services (WKFS) released Tuesday its second Regulatory & Risk Management Indicator for the U.S. banking industry, a metric of major concerns worrying banks and credit unions nationwide.
According to the latest results, the January 2014 indicator registered 121, a jump up from the 2013 baseline score of 100. Driving the increase, WKFS said, were “mounting pressures expressed by banks and credit unions in all seven of the Indicator’s compliance and risk management factor categories” as well as huge fines and settlements at the federal level in 2013’s last quarter.
“The latest Indicator results verify a growing number of U.S. banks and credit unions are more proactively addressing regulatory change and potential risks,” said Timothy Burniston, VP and senior director of WKFS’ Risk & Compliance Consulting Practice. “Not only are these institutions more concerned about compliance and risk management, but they’re also devoting additional time and resources to addressing these areas to head off potential issues, and facilitate growth and performance objectives.”
Among the 10 factors influencing the headline indicator, fines and settlements stemming from the regulatory environment were the most worrisome among companies surveyed, with that category showing an indicator score of 326.
Also ranking high were concerns about leadership impact (122) and resource investment (126) on the risk management side.
Given the elevated tension regarding regulatory enforcement, it may come as no surprise that out of all respondents, 69 percent rated maintaining compliance with changing regulations as at least a seven out of 10 in terms of concerns. A large number—66 percent—also expressed worry about their ability to demonstrate compliance to regulators.
Based on last year’s guidance, the majority of respondents also rated the newly implemented qualified mortgage (QM) requirements as a significant concern: 67 percent compared to 40 percent in January 2013.
In fact, according to WKFS, only one-third of respondents said they plan to offer non-QM home loans now that the rule is implemented, while an equal share will not offer such products. The remaining third was uncertain.
