Regulatory compliance and risk concerns remain high in a number of key areas for U.S. banks and credit unions, according to the results of Wolters Kluwer’s 2020 Regulatory & Risk Management Indicator survey. This year’s survey, conducted by Wolters Kluwer’s Compliance Solutions business, generated a Main Indicator Score of 103, an eight-point increase over the 2019 score. This was influenced by concerns about managing regulatory change, mortgage-related regulations, and U.S. Coronavirus Aid, Relief, and Economic Security (CARES) Act requirements.
The COVID-19 pandemic weighed heavily on respondents’ minds: 86 percent 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 percent), business resilience and adaptability (79 percent), and recession fears (78 percent).
“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 Advisor 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.”
Burniston will share insights on this year’s Indicator survey findings in a webinar, “Annual Survey Results Signal Direction for Banking Industry,” 2-3 p.m. EST Wednesday, Dec. 16, along with Wolters Kluwer Senior Specialized Consultant Elaine Duffus and Steven D’Alfonso, Research Director, IDC Financial Insights.
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 August 4 and September 3, 2020 and generated 665 responses.
Of top obstacles cited in implementing effective compliance programs, 46 percent ranked manual compliance processes as a “7” or higher concern on a 10-point scale, and 41 percent cited inadequate staffing, both slight declines from 2019 levels. Perceptions of regulatory scrutiny of fair lending programs remained relatively unchanged, with 42 percent indicating that the level has remained the same.
Looking forward to 2021, top risk management priorities identified include cybersecurity (72 percent), credit risk (61 percent) and compliance risk (40 percent), 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 percent citing the likelihood of regulatory relief as either “somewhat unlikely” or “very unlikely” compared to 45 percent in 2019.
“The input from our survey respondents reflects another year of challenges for the U.S. banking industry as it navigates through the tumultuous impacts of the pandemic–and accompanying regulatory changes,” said Steven Meirink, Executive Vice President and General Manager for Wolters Kluwer Compliance Solutions. “The industry has weathered these challenges admirably, and we continue to support our clients in addressing the many regulatory and risk management issues they face as they work to serve their customers.”
Over the next 12 months, respondents’ most pressing regulatory compliance challenges include, in order of importance, keeping current with and managing regulatory changes, pandemic impacts, mortgage-related regulations, and employee staffing challenges. Respondents also expressed a high level of concern about their ability to comply with Bank Secrecy Act/Anti-Money Laundering requirements, fair lending laws and regulations, Current Expected Credit Losses (CECL) standards, and possible beneficial ownership rule changes.
- Access to market conduct exam criticisms
- Ability to perform self-audits
- Easily review state requirements for a specific line of business
- Linked legal requirements to subject categories and terms
- Reporting to ensure compliance accountability
The market conduct examination process for insurance companies is complex, time-consuming and costly. A common practice to tackle these challenges is to conduct a risk-based approach to one’s business. Under a risk-based model, companies identify the business practices that are of significant regulatory interest or that have resulted in significant regulatory fines and ensure that those areas of increased risk are compliant. Access to market conduct exam criticisms is a critical link for companies to identify those compliance risks, which are typically regulatory hotspots.
Wolters Kluwer’s NILS™ MCE solutions offer the following benefits:
- Access to market conduct exam criticisms
- Ability to perform self-audits
- Easily review state requirements for a specific line of business
- Linked legal requirements to subject categories and terms
- Reporting to ensure compliance accountability
The market conduct examination process for insurance companies is complex, time-consuming and costly. A common practice to tackle these challenges is to conduct a risk-based approach to one’s business. Under a risk-based model, companies identify the business practices that are of significant regulatory interest or that have resulted in significant regulatory fines and ensure that those areas of increased risk are compliant. Access to market conduct exam criticisms is a critical link for companies to identify those compliance risks, which are typically regulatory hotspots.
Wolters Kluwer’s NILS™ MCE solutions offer the following benefits:
- Access to market conduct exam criticisms
- Ability to perform self-audits
- Easily review state requirements for a specific line of business
- Linked legal requirements to subject categories and terms
- Reporting to ensure compliance accountability
Wolters Kluwer Compliance Solutions is a market leader and trusted provider of risk management and regulatory compliance solutions and services to U.S. banks and credit unions, insurers and securities firms. The business, which sits within Wolters Kluwer’s Governance, Risk & Compliance (GRC) division, helps these financial institutions efficiently manage risk and regulatory compliance obligations, and gain the insights needed to focus on better serving their customers and growing their business.
Wolters Kluwer’s GRC division provides an array of expert solutions to help U.S financial institutions manage regulatory and risk obligations, including customized offerings to address COVID-19 challenges. Compliance Solutions’ Paycheck Protection Program Supported by TSoftPlus™ helps lenders’ customers access critical stimulus funding. Wolters Kluwer Lien Solutions’ iLien for Main Street helps lenders optimize their due diligence and lien management efforts when securing loans for small and medium-sized businesses under the Main Street Lending Program.
About Wolters Kluwer Governance, Risk & Compliance
Governance, Risk & Compliance is a division of Wolters Kluwer, which provides legal and banking professionals with solutions to help ensure compliance with ever-changing regulatory and legal obligations, manage risk, increase efficiency, and produce better business outcomes. GRC offers a portfolio of technology-enabled expert services and solutions focused on legal entity compliance, legal operations management, banking product compliance, and banking regulatory compliance.
Wolters Kluwer (AEX: WKL) is a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. Wolters Kluwer reported 2019 annual revenues of €4.6 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide.
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