Banking Compliance Index Nearly Doubles In Q2

The Banking Compliance Index (BCI) nearly doubled from Q1 2018 to Q2 2018, revealing the significant impact of regulatory relief bill S.2155, which contained over 50 separate regulatory changes. This BCI increase reinforces that any change, whether adding or reducing regulations, translates to extra work for institutions. Also, the agencies have now filled their vacant leadership positions, which reduced some of the regulatory uncertainty experienced last quarter and may have contributed to a warmer enforcement climate.

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“It’s not unusual to experience an uptick in regulatory activity from Q1 to Q2, but this is a more substantial jump than we’ve seen in years past,” stated Donna Cameron, Continuity’s director of regulatory I/O. “We’re just starting to see the impact of the regulatory relief bill on banks, credit unions and lenders. The bill added a significant number of pages and material that organizations had to read, interpret and decide on appropriate action forward. This increase in activity is only expected to continue as the agencies issue implementing regulations and guidance documents.”

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The Banking Compliance Index, published quarterly by Continuity’s Regulatory Operations Center® (ROC) quantifies the incremental burden on financial institutions in keeping up with regulatory changes. The typical community financial institution needed more than one full-time employee (1.11) just to keep pace with regulatory changes. This score doesn’t include the resources institutions are already dedicating to regulatory and compliance efforts.

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There were 61 issuances delivered between April 1 and June 30, 2018, up from 50 issuances the previous quarter. Compliance costs increased from $10,776 in Q1 2018 to $19,114 in Q2 2018, and hours required to comply per institution went from 219 hours in Q1 2018 to 369 hours in Q2 2018, a 68-percent increase.

Cameron added, “When any change occurs, institutions must make significant modifications such as retraining staff, upgrading technology, reevaluating risk and tweaking operational procedures. This is why it’s critical for institutions to have a strong, comprehensive change management system in place to help them quickly and efficiently navigate the impact of regulatory activity, especially now in the wake of regulatory relief.”

Reinstatement of the Protecting Tenants at Foreclosure Act was a significant change during Q2 2018. The act, which was terminated in December 2014, was reinstated by the regulatory relief bill, effective June 23, 2018. Other notable provisions of the bill were changes to the ways reciprocal deposits and High Volatility Commercial Real Estate are calculated and reported. These amendments were effective on the day the regulatory relief act was enacted, May 24, 2018.

“We can expect to see a more active second half of the year in regards to regulatory activity and issuances,” Cameron explained. “Agencies have made it clear that they plan to accelerate regulatory relief activity and provide guidance as soon as possible. Financial service organizations must proactively work with their regtech partners to help them automate compliance processes, interpret regulations and centralize efforts to prepare for the upcoming changes.”

The Banking Compliance Index (BCI) is a quarterly tracking index published by Continuity’s Regulatory Operations Center. It measures the incremental cost burden on financial institutions to keep up with regulatory changes.

Tony Garritano

Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at