Increased anxiety over the new “Know Before You Owe” mortgage rules leads the list of major challenges cited by U.S. banks and credit unions in this year’s Regulatory and Risk Management Indicator survey conducted by Wolters Kluwer Financial Services. Concern over the new rules, also known as the TILA-RESPA Integrated Disclosure (TRID) rules, jumped nine percent from last year’s Indicator survey results, with 86 percent of respondents ranking TRID as the top regulatory challenge facing their organization.
Overall, concerns about regulatory compliance and risk management challenges rose seven percent compared to last year’s Indicator results. Concern over the Consumer Financial Protection Bureau’s rulemaking authority generated a 78 percent rating, up two percent from the previous year’s results,
When asked about escalated risk priorities for 2016, 66 percent of respondents cited cybersecurity as their top concern. Increased cybersecurity anxiety, against a backdrop of well-publicized security breaches the past year at a number of prominent U.S. government, retail, and financial institutions, was followed by regulatory change management (49 percent), third-party risk (30 percent), and fair lending compliance (29 percent).
Conducted in August 2015, the Indicator generated 539 responses among banks, credit unions and other lenders. To calculate the Indicator scores, Wolters Kluwer Financial Services used 10 main factors, seven of which revolve around direct input from banks and credit unions on their top compliance and risk management concerns, and three of which are based on regulatory data the company compiles. Survey feedback, together with increasing regulatory fines, new regulations, and enforcement actions issued by federal regulators, drove the increases in the Indicator scores.
“The continuing upward trajectory of concern shown by banks and credit unions closely correlates with the growing level of angst we’ve witnessed while helping clients the past year across a range of issues—including TRID preparation—with other major regulations such as the Home Mortgage Disclosure Act proposed data collection rules looming on the horizon,” said Timothy R. Burniston, executive vice president, Wolters Kluwer Financial Services. “Their concerns reinforce the need for instituting thoughtful, proactive regulatory change and risk management practices to help address these mounting challenges.”
When asked about complying with the complex TRID rules, 32 percent of respondents cited “collaborating with stakeholders,” while 24 percent identified “last-minute changes that trigger closing delays” as the top anticipated challenges. Another 17 percent viewed “information technology preparedness” as top challenges in complying with TRID, while 18 percent were unsure about the regulation’s greatest impact.
Despite the continued increases in overall anxiety levels, staffing investments to bolster regulatory compliance and risk management efforts declined slightly, with 22 percent of respondents indicating their organizations had moved staff during the past year from revenue-producing roles to help address new regulatory requirements—a seven percent decline from 2014—and another 21 percent citing they had increased staffing levels to help manage risk, a 13 percent decline from last year’s results.