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Compliance Index Shows Few Regulatory Changes in First Quarter

April 17 – On the heels of a burdensome fourth quarter in 2016, U.S. financial institutions encountered fewer regulatory changes in Q1 2017 than any quarter in the nearly five-year history of the Banking Compliance Index. Simultaneously, regulatory agencies issued just 57 enforcement actions against financial institutions in the quarter, an unprecedented cooling 64 percent below the average number of EAs per quarter dating back to Q1 2013 when there were 157 EAs.

The index, compiled by experts at Continuity’s Regulatory Operations Center to measure and analyze the volume of regulatory change and enforcement impacting financial institutions, had never registered a BCI score below 1.0 since the index was first published in 2013. Q1’s historic .79 score indicated that the average financial institution needed less than one full time employee to read, process and comply with the quarter’s regulatory changes.

Regulatory change has been limited by several related factors, including new leadership in the executive and legislative branches of government; unfilled leadership positions or soon-expiring leadership terms at agencies like the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency; and uncertainty about the fate or future purviews of specific agencies, like the Consumer Financial Protection Bureau.

Though the historic low BCI figures might indicate a regulatory respite to the untrained observer, financial institutions are still grappling with the uncertainty emanating from Washington’s regulatory bodies.

“Financial institutions are nervous, and rightfully so,” explained Continuity EVP and Chief Regulatory Officer Pam Perdue. “It’s impossible for the average bank to clearly project compliance staffing costs when it needs to spend 809 hours complying with new regulatory changes in one quarter and just 222 in the next.”

The Q1 2017 BCI tracked a nearly 75 percent decrease in hours the average institution needed to comply with the quarter’s regulatory changes.

“Looking back just one quarter to Q4 2016, the BCI counted a staggering 115 regulatory changes,” said Continuity Director of Regulatory I/O Donna Cameron. “Many of last quarter’s regulatory changes have yet to go into effect, so despite the dip in regulatory change volume, many diligent compliance officials at financial institutions around the country are still working overtime to prepare for and comply with those and previous quarters’ changes.”

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.

Over 740 financial institution professionals registered for the Continuity RegAdvisor Quarterly Briefing webcast on April 13. During this session, regulatory experts Pamela Purdue and Donna Cameron reviewed the Q1 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.

About Continuity

Continuity is a leading provider of Regulatory Technology (RegTech) solutions that automate compliance management for financial institutions of all sizes.

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