Why Banks need to Rethink Compliance?

Does “should” really mean “shall”?

In the world of banking supervision and regulation, there is a familiar, longstanding frequency to the issuance of new guidance: regulators issue new guidance; banks analyze and interpret it, set a strategy for compliance, begin operationalizing it, and move forward with the knowledge that most new guidance is simply a set of expectations rather than hard-and-fast requirements. In today’s environment, the assumption that guidance is just an expectation, not required, is no longer acceptable.

A starting point for a bank in determining its compliance with all laws, rules, regulations, and regulatory guidance is to perform a strategic self-assessment especially in light of the new post Dodd-Frank Act regulatory environment. For many banking organizations this is a common technique; however, few have actually undertaken the effort required to assess their level of compliance with regulatory guidance, largely because “knowing” hasn’t been mission-critical. Today, what you don’t know may hurt your organization, and many banks find themselves becoming reactively proactive.

Strategic self-assessments can be important tools for the identification and assessment of how compliance risks are being overseen at both the line-of-business and enterprise levels. In addition, they can be critical in helping organizations prepare for audit and regulatory examinations by assisting in proactively identifying issues and noncompliance and allowing for time to address such issues.

Once a bank has determined its baseline and identified any compliance program gaps, the next step is to build a strategic plan. Once the strategic plan has been built, detailed actions and milestones for executing the plan should be defined and documented via an in-depth action plan. The action plan should address gaps identified during the self-assessment process, actions required for implementation of the strategic plan, and any open regulatory findings pertaining to the bank’s management of compliance.

It takes time to move on compliance in a new environment like the one banks face today. There are new policies and procedures to be developed, socialized, and implemented with people, process, and technology impacts across the organization. A new approach to managing compliance risk is necessary and is now a more-important-than-ever component of a growth plan.

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