Regulatory, risk management burden increases

Banks in the United States are carrying a much heavier regulatory and risk management burden than they were a year ago, according to an index from Wolters Kluwer Financial Services of St. Cloud, Minn..The Regulatory & Risk Management Indicator increased to 121 in January from a baseline score of 100 a year ago. Driving the increased score were mounting pressures on banks and credit unions surveyed by Wolters Kluwer as well as more than $8 billion in new regulatory fines and settlements at the federal level in the last three months of 2013, the company said..In particular, financial institutions demonstrated a significantly heightened concern over the Consumer Financial Protection Bureau's recently finalized Qualified Mortgage, Qualified Residential Mortgage and mortgage servicing requirements and guidelines. Two-thirds named QM requirements a top concern, up 27 percentage points from 2013, while QRM requirements were a top concern for 56 percent, up from 44 percent a year ago. Mortgage servicing requirements and guidelines were named by 59 percent, an increase from 49 percent a year ago..Only a third of respondents said they planned to offer non-QM home loans following the implementation of the CFPB's new rules..Concern over combined TILA/RESPA disclosures remained high but decreased after the final rules were issued..On the risk management front, banks remain most concerned with regulatory risk and fair lending risk. Two-thirds of respondents listed regulatory risk as a significant concern, up 12 percentage points over last year's 58 percent. Fair lending risk was the next largest area of concern, with 38 percent of respondents choosing it. Fair lending risk did not appear as an option on the 2013 survey..Other major risk management concerns included asset and liability management, IT risk and fraud..To calculate its Indicator, Wolters Kluwer uses 10 main factors, seven of which revolve around direct input from banks on their top compliance and risk management concerns and three of which are based on regulatory data the company compiles..The Regulatory & Risk Management Indicator began with a baseline score of 100 in January 2013 when Wolters Kluwer surveyed nearly 400 U.S. banks and credit unions. The company repeated the survey a year later with approximately the same number of institutions..Wolters Kluwer Financial Services is a provider of risk management, compliance, finance and audit solutions and services.