Regulatory changes: Top of mind for bankers
Spending a lot of time at your financial institution on regulatory issues? You’re not alone.
A recent survey of bank executives by KPMG LLP found that regulatory issues are top of mind for many in the industry. Thirty-five percent of respondents expect bank management to spend most of its time and energy in the coming year on initiatives related to navigating big changes in the regulatory environment. That’s nearly double the 18 percent of last year’s survey. In addition, 77 percent said political and regulatory uncertainty pose the biggest threat to their bank’s business model, and 72 percent named regulatory and legislative pressures as the most significant barrier to growth over the next year.
Brian Stephens, national leader of KPMG’s Banking and Capital Markets practice said the pervasive impact regulatory-related matters are having on institutions has kept executives focused on dealing with them, in part through strengthened risk management and compliance programs.
“Exams and interactions with regulators are increasing and we don’t see any indication this will end any time soon, as hundreds of rules coming out of the Dodd-Frank Act — including the Volcker Rule, living wills, and consumer protection — are still being written and less than 40 percent overall have been finalized to date,” Stephens said in a statement from the firm.
Sageworks, too, hears from clients that regulatory scrutiny and examinations continue to be a source of stress for financial institutions as they must quickly adapt processes and methodologies to address changing regulations and compliance issues.
KPMG’s survey respondents cited regulatory compliance costs (58 percent) and other Dodd-Frank related compliance requirements such as consumer protection (47 percent) as having the greatest negative impact on their bank’s growth.
Banks are actively re-engineering internal processes and systems as a result of regulatory pressures, according to the survey, which reflects the responses of 100 senior executives. Indeed, more than half named IT spending as the top area for increased spending over the next year, with spending on projects that can leverage data more effectively for regulatory requirements a popularly cited project.
“Banks are becoming more actively engaged in using data and analytics to extrapolate insights that help improve risk management and compliance, drive customer growth, increase operational efficiency, develop and refine product offerings, and more,” said Judd Caplain, KPMG’s Advisory Industry Leader for Banking and Diversified Financials.
Only 34 percent of respondents said their bank already had high data and analytics literacy.
Read the entire survey report here.
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