Compliance Officers: Growing Reg Burden Limits Products, Services

Growing regulatory compliance burdens have led nearly half of banks to reduce their offerings of financial products and services, according to ABA’s biannual Survey of Bank Chief Compliance Officers released today. A combined 46.3 percent said their banks had cut offerings for loan accounts, deposit accounts, both, or for other services — up slightly from 2011 and 2013 and up substantially from the 21.9 percent who reported exiting a product line or channel due to regulatory burdens in 2009. Meanwhile, nearly 46 percent of chief compliance officers said their banks had either decided not to launch a product, open a new channel, or hold off on entering a new market or had held off while determining the regulatory effect.

For example, the Ability-to-Repay Rule has led one-third of banks to turn down otherwise creditworthy mortgage borrowers, according to the survey. An additional 20 percent said they were not sure. The rule’s impact was felt most by banks with between $1 billion and $10 billion in assets, of which 42.5 percent said the rule had limited credit. About one-third of banks are exclusively making Qualified Mortgage loans.

The survey covered trends in compliance outsourcing and third-party systems. Nearly half of banks have outsourced at least one compliance obligation; of these, 76.9 percent outsourced the compliance audit function, 46.3 percent outsourced fair lending reviews and 22.3 percent outsourced UDAP/UDAAP reviews. Large numbers of bankers reported using third-party software or systems to handle Bank Secrecy Act, Home Mortgage Disclosure Act and foreign sanctions requirements.

A little over half of banks have one to five compliance FTEs. At banks with under $100 million in assets, two-thirds have one FTE or fewer. Just over 55 percent say compliance budgets have risen since 2013, mostly due to hiring more staff and handling a growing regulatory burden. Especially at smaller banks, compliance chiefs are also likely to serve as CRA officers, BSA officers and chief privacy officers. For more information, contact ABA’s Rick Freer.