It's the start of 2018 and you're busy. That's why we've pulled together 5 trends in finance and banking that you may have missed. From CFPB updates to branch strategy, we'll share some great articles and tell you what it means for you.
The results are in, and according to scientists on an international panel commissioned by the UN, our worst fears have now been confirmed. This has been the longest-seeming January on record!
From HMDA Plus to dramatic updates from the regulators, and surprising news about branch strategy, the start of 2018 has been one for the books.
With the increase in responsibilities during the start of 2018 filling your already-packed work week, you may have missed a headline or two. But don’t worry, our team of compliance risk experts is here to make sure that you are able to stay on top of what’s been happening over the past week.
So, take a quick break, and pour yourself a cup of coffee to enjoy while reading through our carefully curated summaries of the past week’s biggest stories.
Here are the biggest finance, banking, and compliance news stories you might have missed:
1. More Changes and Even Bigger Issues at the CFPB
The CFPB has provided us with a consistent stream of newsworthy headlines over the last couple months. We've witnessed the former CFPB head Richard Cordray step down, a stand-off over the future leadership, and the current administration naming Mick Mulvaney as his replacement.
With this changing of the guard comes an overhaul in the CFPB’s governing philosophy. In a recent memo, Mulvaney calls for the agency to move away from its regulation by enforcement policy to governing that focuses on rulemaking instead.
I think it is fair to say that the previous governing philosophy here was to aggressively "push the envelope" in pursuit of the "mission;" that we were the "good guys" and the "new sheriff in town," out to fight the "bad guys."
Simply put: that is what is going to be different. In fact, that entire governing philosophy of pushing the envelope frightens me a little. I would hope it would bother you as well.
- Mick Mulvaney, Acting Director of the CFPB in a recent memo
This means that the current practice of regulators seeing something that looks illegal but was previously accepted and then prosecuting the offenders (i.e. "regulation by enforcement") will be replaced (according to Mulvaney) by the practice of creating rules and then persecuting those who continue illicit activities after the fact.
Why It Matters: This seems to be a logical shift in philosophy, but as contributor Matt Levine writes in Bloomberg, it’s much more complicated than that. It also doesn't really mean anything for most banks in the US.
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If an institution is doing something that is discriminatory, but the law doesn't yet prohibit it, they can get away with it until it's identified. It's kind of like saying "you can steal until we write a law against stealing, and then you can't anymore."
It also matters because the CFPB only regulates the largest financial institutions. This memo in itself doesn't mean any meaningful changes for most community and regional banks.
We really like the idea of clearer, fairer, and more transparent regulations, and we hope that this shift in philosophy will result in making compliance easier for everyone.
Mulvaney’s takeover of the CFPB and subsequent memo hint at larger questions about the current state of financial regulation.
As Daniel Press at the Competitive Enterprise Institutes writes, there are five key points needed to understand how financial regulation is moving:
- The Financial CHOICE Act,
- Banking Reform,
- Rein in the Consumer Financial Protection Bureau,
- Reform the Government Sponsored Enterprises,
- Facilitating New Technologies.
2. Will Better Branch Strategies be the Key to Growth in 2018?
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Over the first several weeks on 2018, one thing is all but certain among financial institutions: branch strategy will be the defining factor in determining success this year.
Branches constitute a big investment for most banks, but consumers are not relying on the branch in the way they have in the past.
In particular, online and online mobile banking has changed how many consumers interact with traditional retail banks, and new peer-to-peer payments are impacting the way consumers approach transactions. Some banks are using innovating strategies to attract new customers and keep existing clients happy.
In 2017, Bank of America also opened 30 new branches across the US. According to an article in the Charlotte Observer, “of those [new branches], 25 were in areas not previously served by retail branches but where the bank has an existing wealth-management or commercial-banking presence. Also last year, the bank renovated nearly 300 branches.”
Banks that want to grow in 2018 will need to look at their branch strategy to ensure that it's efficient, effective, and meeting consumer needs.
Why It Matters: This clearly shows the importance of a strong bank branch strategy for financial institutions that are looking to grow, reduce compliance risk, and increase profitability. The best news? Ncontracts can help.
If you want to learn how Ncontracts can help your profitability through bank branch strategy, make sure to check out our Branch Strategy Solutions!
Please keep in mind that any changes to the branch network may result in additional Fair Lending and CRA compliance risk, because your market and services to Majority-Minority and Low- to Moderate-Income census tracts may change. Make sure to consider your risk as you evaluate your branch network.
That's one reason Ncontracts is such a good partner. In addition to our growth and geoanalysis expertise, we have decades of experience in Fair Lending and CRA compliance analysis, and will help you manage and mitigate your risk.
3. CRA Efforts To Aid Puerto Rico Recovery Efforts
A big decision came down regarding the Community Reinvestment Act, as federal bank regulators said that they “would give favorable [CRA] consideration to banks outside Puerto Rico and the U.S. Virgin Islands for activities meant to revitalize the areas hit hard by Hurricane Maria.”
Our team at Ncontracts sincerely hopes that this decision by regulators will lead to positive action regard the aid and rebuild of Puerto Rico and the surrounding islands. As those of you who have followed the news might now, much of Puerto Rico has been without power and other essentials for months.
Why It Matters: This decision appears to open up another avenue to help the island recover, and help you improve your CRA performance. Win-win!
As you might recall, the U.S. Treasury Department had previously decided to withhold billions of dollars that Congress approved a year ago for post-hurricane recovery. To explore this trend more and find out how this could affect your institution’s CRA activity, we recommend reading the following three articles:
4. Put These 2018 Regulatory Compliance Deadlines on Your Calendar
New year means new compliance deadlines! Here are the key ones that you need to be aware of for compliance:
- HMDA - Effective Jan. 1, 2018. Should have begun collecting the information on Jan. 1, 2018, and will report it by March 1, 2019.
- Regulation B - Effective Jan. 1, 2018
- CRA Updates - Effective Jan. 1, 2018
- Prepaid Cards - Effective April 1, 2018
- BSA Customer Due Diligence - Effective May 11, 2018
- Regulation CC - Effective July 1, 2018
- TRID Amendments - Effective Oct. 1, 2018
Why It Matters: Some of these regulations are overlapping, and may result in increased compliance pressure. Make sure to actively manage your calendar so that you're prepared.
For more information on these deadlines, take a look at this post by CUInsight.
Related: Regulatory Update for March 2023: Final 1071 Rule, SVB's Failure, and Junk Fees
5. A Coalition of 43 Community Bank Associations Push for Regulatory Relief
Big news for the community bankers reading this, as a coalition of 43 community bank associations is pushing for the Senate to pass bipartisan legislation to give relief for community banks. Banks have always asked for regulatory relief, so this in itself isn't new.
As mentioned above, we are all for clear, transparent, and reasonable regulations that allow banks to thrive while also protecting consumers. But we're not getting our hopes up too much. To learn more about these community bankers' efforts, you can read Financial Regulation News’ article, “Community Bankers Urge Senate to Pass Regulatory Relief”.
Why It Matters: If any regulatory relief does come down, then we'll celebrate right there with you. Until then, consider compliance to be "business as usual." Relaxing or de-prioritizing compliance can open your institution up to unnecessary risk.
Many of the key consumer compliance laws have been on the books for decades, and rolling back regulation tends to be more difficult than creating it. In addition, consumers are now more aware than ever of the role of institutions like the CFPB, given today's politically charged climate and the dramatic changes taking place.
We would love to see the pressure ease up so that bankers can relax more, and take a more proactive and growth-focused approach to compliance. After all, good compliance is good for business!
That’s it for this week’s compliance news round up! If you have any questions about anything, make sure to get in contact with us anytime.
Related: What Is A Compliance Management System And Why Your FI Needs One
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