But what will that mean for those of
us in the compliance trenches? Will this
mean we won’t have to worry about Reg.
Z and BSA anymore? No one thinks
change will be that drastic, but will some
rules go away? Will there be a change in
the enforcement attitudes of the federal
agencies? How do we respond to questions from Boards and senior management around the future of the regulatory
compliance function in banks?
A look at the tea leaves guarantees
just this: there will be changes, but no
one knows for certain what they will
be. But there are important clues hidden within the sea of rhetoric, opinion,
and reports that provide some guidance
when attempting to determine how the
compliance industry will be affected.
The following are some thoughts to
keep in mind:
■ ■ ■ The knee-jerk reaction from some
management teams will be to cut back on
compliance, meaning staffing, resources,
automation, and so forth.
This would not be wise, however,
certainly not right away. A reduction in
compliance department staff or capabilities could hurt the effectiveness of the
bank’s Compliance Management System,
or CMS. A look at any number of recent
enforcement actions demonstrates that
deficiencies in entities’ CMSs were a contributing cause of regulatory problems.
The adequacy and effectiveness of
your CMS is still a primary responsibil-
ity, and regulators have been looking
closely at this now more than ever
before. Overdoing any cuts risks your
bank’s compliance credibility, which is a
dangerous place to be.
Changes to a bank’s compliance department, whether in staffing, resources,
or otherwise, should be made for normal
business reasons rather than due to anticipated (and as yet unrealized) reductions
in regulatory attention or enforcement.
Why might stories of regulatory enforcement easing be overblown?
■ ■ ■ States and community groups are
pledging to “fill the gap” if federal enforcement is perceived as tailing off.
If in fact we do see a decrease in
Federal enforcement, other regulators
are ready to step up. The New York
State Department of Financial Services,
as well as Attorneys Generals (AGs) in
states including California and Illinois,
are among those pledging to up their
enforcement of consumer protection
laws and regulations if they feel federal
enforcement is lacking. Section 1042
of the Dodd-Frank Act authorizes state
AGs and regulators to bring civil actions
to enforce Dodd-Frank’s UDAAP provisions, and TILA, RESPA, and the FCRA
specifically grant enforcement authority
to state AGs. Some will not be shy in using their power.
■ ■ ■ There are many state laws to enforce as
well (meaning national banks may find
themselves in some preemption battles in
the years to come).
Attention will come not just from
regulators. Consumer groups are reporting record contributions in response to
these same worries of less enforcement.
They promise to be much more active in
their efforts to hold banks accountable
for their perceived shortcomings.
Examiners still have a job to do even
if enforcement lightens up.
Again, no one can predict whether the
Federal enforcement mechanism will in
fact decrease. But whether it does or not,
compliance, fair lending, CRA, safety and
soundness, and all the other varieties of
examinations certainly aren’t disappearing. Problems will still be identified, Matters Requiring Attention (MRAs) will be
issued, and violations dealt with.
Think of this another way: more attention will be placed on “bad actors,” so certainly don’t be one. But more importantly,
don’t look like one. If it appears your bank
is cutting back on compliance because it
believes it isn’t important anymore, the
credibility of your bank will surely suffer
in the eyes of examiners. It will be noticed.
The real risk is one of perception.
Management or others may wish to cut
back on compliance due to what they’re
hearing in the press or due to other preconceived political notions, but it can
easily be overdone.
There is still plenty to pay attention
to: dealing with new and changing rules.
Rare is the bank that would say it has
too many compliance staff or resources.
The years following the passage of
Dodd-Frank have been quite intense,
with implementation of the Ability-to-Repay/Qualified Mortgage (ATR/QM),
Remittance Transfer, and TILA-RESPA
Integrated Disclosure (TRID or Know
Compliance in a Trump World
AMONG THE FIRST THOUGHTS of many in the banking industry once President Donald Trump was elected was something along the lines of, “finally this intense compliance burden can lighten up!” Much has been made in the press of the new President’s statements
regarding eliminating regulations and promoting business and job growth.
