NEW HAVEN, Conn.—Enforcement actions hit a new all-time high during the second quarter of 2015 as regulators continued to crack down on non-compliant financial institutions, according to the Q2 2015 Banking Compliance Index.
The index, which is compiled and analyzed by experts at Continuity’s Regulatory Operations Center (ROC), found that more than 200 enforcement actions were issued against financial institutions between April and June this year. This is the highest level of enforcement actions seen during the past 20 years, according to the ROC. “Second quarter activity increased by a whopping 18% over the previous quarter,” the organization said.
"Regulators are really hitting their stride in their ability to enforce and financial institutions are feeling the pressure," said Pam Perdue, executive vice president of regulatory operations at Continuity, in a released statement. "This isn't a seasonal trend or a blip on the radar; it's the new normal."
Additionally, the average FI needed to devote an additional $41,471 and 582 hours—or the equivalent of 1.72 full-time employees—to managing just the new regulatory changes introduced in the second quarter, according to the ROC. The organization added that is an $11,000 increase over the level of spending required in the first quarter.
"The average hourly wage for a compliance professional went up more than $2 between the first and second quarters," Perdue said. "The costs of compliance just keep rising, and it's becoming increasingly difficult for many institutions, especially those with tight margins, to manage the added expense."
Even though regulations have decreased in size and complexity in the most recent quarters, compliance needs have persisted, Continuity said. For example, while 73 regulatory changes in 1,644 pages cost FIs $41,471 to manage in the second quarter of 2015, 75 changes in 3,000 pages cost FIs just $34,755 during the second quarter in 2014.
"A lot of bankers might feel like there's less going on when it comes to new regulations these days, but that's really not true," she said. "The rules may be smaller, but that's just making it harder to see just how much has to be done."
The Banking Compliance Index (BCI) is a quarterly tracking index published by ROC. 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. Using key indicators including 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.