Compliance risk management systems remain high for banks, with the implementation of TRID on October 3, 2015, identified as a key risk, according to the Office of the Comptroller of the Currency (OCC)'s Semiannual Risk Perspective released Monday.
Comptroller of the Currency Thomas J. Curry said on Monday that "Banks have more work to do to ensure full compliance" with TRID as well as the amended Military Lending Act (MLA), which was expanded to include coverage of all consumer credit covered under the Truth in Lending Act and Regulation Z except for residential mortgages.
The TILA-RESPA Integrated Disclosures (TRID), or the integration of the new mortgage disclosure forms, the Loan Estimate and Closing Disclosure, have presented significant compliance challenges for banks and the mortgage industry as a whole because of the significant systems and operational changes required to comply. Nine months after the controversial TRID rule has taken effect, compliance is still a challenge for banks, the OCC reported.
"The implementation process required extensive coordination with third parties, and there were numerous reports of issues relating to third-party readiness," the report stated. "Many banks also have dedicated substantial resources to understanding the rules, adapting systems, and training personnel. Full implementation of the rules, however, continues to pose operational and compliance risks and challenges."
The OCC said that FY 2017 examination strategies incorporate assessing compliance with rules as well as banks' compliance management systems and overall compliance efforts, in recognition of the scope and scale of challenges banks need to achieve effective compliance with TRID.
Even with the elevated risk presented by TRID and the amended MLA, Curry said that 2015 was still a solid year for banks.
"The banking sector benefited from the improving economy with broad-based loan growth, driven by commercial and industrial and real estate lending," Curry said. "Income and profitability were up, particularly at banks with less than $1 billion in assets, which had return on equity that exceeded 10 percent on average. Large banks net income also improved, but higher provisioning expenses partially offset gains in net interest income and lower overhead. The improvement in banks’ performance is also reflected in the decreasing number of 4- and 5-rated national banks and federal savings associations, which fell 34 percent in 2015. All of these indicators suggest a strong and healthy federal banking system. However, despite these improving indicators, as regulators, we must remain on guard and our top concerns for the banking system remain strategic, credit, operational, and compliance risks."
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