NEW HAVEN, Conn.–Community financial institutions (CFIs) faced a record-breaking 125 regulatory issuances during the fourth quarter of 2015, increasing the total number of regulatory pronouncements to 329 for the full year 2015, according to the Banking Compliance Index.
That is a 56% increase from the number of rule issuances institutions saw during Q3 2015, and a 9% increase over the full-year 2014. The Banking Compliance Index (BCI) is published by Continuity and its Regulatory Operations Center.
“These changes come along with a staggering 4,309 pages of new regulations that must be read, interpreted and implemented by each institution in addition to the rules that already apply to CFIs,” Continuity said. “The BCI also showed the total number of hours a typical institution would need to devote to the Q4 2015 changes soared to 968, increasing the total number of hours to comply to over 2,200 hours for all of 2015.”
Consequently, the index’s FTE Consumption Score during the last quarter of 2015 weighed in at a hefty 2.23, according to Continuity. “This is the highest level calculated since Q3 2013’s 2.34, and represents the number of full-time employees that the typical institution needs in order to keep up with that quarter’s new regulations,” according to the company.
“The volume of new regulatory changes that financial institutions must now quickly get-up-to speed on, in addition to all of the existing regulations they must already comply with, has become a huge burden on financial institutions,” said Pam Perdue, EVP of regulatory operations at Continuity, the regulation technology company behind the BCI. “This burden can be overwhelming and is weighing heavily on community financial institutions who may not be equipped to support some of these rules.”
In addition to dramatic increases in new regulation, Continuity said there were 159 enforcement actions taken against CFIs in Q4 2015, pushing the tally of regulatory enforcement actions to 712 for all of 2015, a 15% increase from the 620 enforcement actions regulators took in 2014.
“The record-breaking volume of regulatory changes, combined with the greater number of hours required to comply, and the level of enforcement actions, has appreciably driven up the incremental cost per banking institution to a record $52,317 in Q4 2015,” Continuity said. The company added those numbers represent a more than 76% increase over the incremental costs seen one year ago in Q4 2014. The total industry cost during Q4 2015 alone was $328 million, according to BCI data.
“The outlook forward is for more of the same. The regulatory agencies don’t look like they plan to slow down anytime soon,” said Donna Cameron, director of regulatory I/O at Continuity. “Some items being worked on now for 2016, such as those related to lending as well as same day ACH payments, have significant impact and will continue to compound the work.”
Continuity said 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. Analysis includes key indicators such as volume, velocity and complexity of regulatory change; time expended to meet regulatory requirement(s); and the supervision and enforcement climate. The BCI data sources include: the CFPB, FDIC, FED, NCUA and the OCC. The BCI is calculated using an average institution size of $350 million.