RIVERWOODS, Ill.–A newly released survey of credit unions and banks has found an increase in the level of concern among executives related to regulatory compliance and risk.
At the same time, however, organizations expressed a high level of confidence they can manage those risks.
Wolters Kluwer’s 2020 Regulatory & Risk Management Indicator survey, conducted by Wolters Kluwer’s Compliance Solutions business, generated a Main Indicator Score of 103, an eight-point increase over the 2019 score.
The increase was influenced by concerns about managing regulatory change, mortgage-related regulations, and U.S. Coronavirus Aid, Relief, and Economic Security (CARES) Act requirements, according to the company.
Wolters Kluwer reported the COVID-19 pandemic weighed heavily on respondents’ minds. Among the findings:
- 86% view the pandemic as a significant or moderate factor in their organizations’ enterprise risk planning
- Other areas of high concern include loan default risk (85%), business resilience and adaptability (79%), and recession fears (78%)
Confidence in Ability to Manage
“Relatively high levels of concern remain across a range of areas, reinforcing the fact that regulatory compliance and risk management issues continue to significantly challenge financial institutions,” said Timothy R. Burniston, senior adviser for regulatory strategy with Wolters Kluwer Compliance Solutions. “That said, respondents expressed their highest levels of confidence in the past four years regarding their organizations’ ability to manage risk across all business lines.”
Wolters Kluwer said the calculation of the Main Indicator Score is based on several factors, including the number of new federal regulations, number of enforcement actions, and the total dollar amount of fines imposed on banks and credit unions over the past 12 months, together with additional information provided by survey respondents. The survey was conducted nationwide between Aug. 4 and Sept. 3, 2020 and generated 665 responses.
Of top obstacles cited in implementing effective compliance programs, 46% ranked manual compliance processes as a “7” or higher concern on a 10-point scale, and 41% cited inadequate staffing, both slight declines from 2019 levels, Wolters Kluwer said. Perceptions of regulatory scrutiny of fair lending programs remained relatively unchanged, with 42% indicating that the level has remained the same.
Looking to 2021
Looking forward to 2021, top risk management priorities identified in the survey include cybersecurity (72%), credit risk (61%) and compliance risk (40%), with concerns about credit risk having jumped 16 percentage points from 2019’s survey.
Asked about prospects for reduced regulatory burden the next two years, respondents revealed greater pessimism, with 56% citing the likelihood of regulatory relief as either “somewhat unlikely” or “very unlikely” compared to 45% in 2019.