The 2023 operating environment has been unrelentingly turbulent for banks. Not only have lending organizations been forced to buckle up and navigate a financial landscape fraught with unprecedented risk, they are simultaneously coming under intensified regulatory scrutiny.
Even in a calm financial market, the sheer volume of mandates that banks must comply with can be overwhelming. The Community Reinvestment Act (CRA), Dodd-Frank Act, Home Mortgage Disclosure Act (HMDA), Fair Housing Act (FHA), Equal Credit Opportunity Act (ECOA), and Truth in Lending (TILA) are among the bulk of prominent regulations that demand considerable effort and attention.
Magnified compliance microscope breeds serious risks ― and consequences
Now, as regulators put several of these laws under the microscope and take progressive actions intended to make lending more equitable, both surveillance and compliance demands are escalating.
And with the CFPB applying more aggressive scrutiny, lenders must ensure that their reporting is both timely and complete. Failure to comply opens a bank to the real dangers of costly penalties and regulatory sanctions, not to mention threats to reputation and operational integrity.
Among the most pressing issues that banks face in light of the bulk regulatory changes are:
Lack of coordination. Banks must consider the modifications in the context of change management. Coordination across the entire organization is essential to compliance fulfillment.
Data accuracy. Some of the modifications will necessitate that data be collected and reported in new categories, or that supplementary detail be extracted in existing categories. In some instances, the modified requirements don’t align with the type of data that banks would normally store. In other scenarios, lenders may be collecting data differently than the agencies want it reported.
Staffing restraints. Banks must carefully consider if their existing compliance staff will be sufficient to cover the requirements. Undeniably, managing fair lending compliance has become a major undertaking, necessitating countless hours of personnel time and demanding significant attention from management.
Manual processes. The modified rules are likely to necessitate new technology deployment, as well as the establishment of checks and balances to ensure that reporting, collecting and protecting data is being executed in the right manner.
Operational risk. Escalating compliance requirements also produce a component of operational risk, as it can lead to heightened exposure and increase the likelihood of oversight.
Arm yourself with the proper toolkit to conquer compliance risk and demands
While effectively managing compliance details is critical to a bank’s success, financial organizations must also have the means of proving that the assets inside their portfolios are compliant ― and be able to report that to regulators.
The right technology solutions can help banks achieve all of these requirements, benefitting both sides of the organization. Technology eases compliance challenges and headaches by decreasing manual efforts and improving the accuracy of submitted data.
Utilizing fit-for-purpose technology, banks gain the ability to:
- Immediately improve the quality of their data and information
- Control costs with a solution that meets today’s needs while scaling to meet future requirement
- Increase access to valuable information and analytical insights that empower solid decision-making
- Reduce the costs and risks associated with managing information
- Extend the value of their existing IT investments
Even more, banks stand to improve community engagement, improve their brand’s reputation, and differentiate themselves in a crowded marketplace.
