Wolters Kluwer research shows significant risk concerns for U.S. lenders

Wolters Kluwer’s latest Regulatory & Risk Management Indicator survey shows that U.S. lenders are concerned with their ability to keep pace with the volume, scope and breadth of regulatory changes. There are, however, opportunities for banks to adopt financial technology solutions, centered around regulatory change management programmes, to counter the concerns, the company says.

The Indicator takes the pulse of the U.S. banking industry by measuring trend information on regulatory and risk concerns, realized and anticipated regulatory impacts on institutions, and the level of banks’ current risk management efforts. The survey’s data inputs generate a regulatory and risk management “pain index.”

“Unquestionably, this year’s survey findings point to the critical role that a robust regulatory change management programme—particularly one featuring an up-to-date regulatory library—plays in helping ensure compliance and addressing risk across a lending organization,” said Timothy R. Burniston, Senior Advisor for Regulatory Strategy with Wolters Kluwer Compliance Solutions.

When asked about the overall compliance and risk areas demanding their focus, respondents identified the ability to manage risk across all lines of business as their top concern (59%), closely followed by the ability to maintain compliance with changing regulations (58%), and ability to keep track of regulations (55%) and ability to demonstrate compliance to regulators (54%), all factors up by several points over last year’s survey.

Concern over new regulations also jumped considerably, from a score of 67 in 2021 to 114, a 47-point increase. Banks are anxiously awaiting a final rule on Community Reinvestment Act (CRA) modernization. Also on the horizon is the release of final rules on small business lending data collection implementing Section 1071 of the Dodd Frank Act, which are expected to have a significant impact and be issued no later than March 31, 2023.

“Clearly, the banking industry increasingly recognizes the upsides in employing and more fully leveraging digital processes and automation, particularly given their impact in reducing or eliminating time-consuming and less accurate manual processes from their everyday workflows,” said Steven Meirink, Executive Vice President and General Manager, Wolters Kluwer Compliance Solutions, in a statement announcing the findings. “Ultimately, embracing digital transformation can help improve the customer experience, foster inclusivity, and allow lenders to more effectively compete.”

Looking forward to 2023, top risk management priorities identified include cybersecurity (72%), compliance risk and credit risk (both at 51%), followed by operational risk and third-party risk (27% and 16%, respectively).

Earlier this week the company announced a record year for independent industry recognition, with 54 accolades for 2022. Among the recent wins were plaudits for Meirink who has been named Digital Lending Solutions Executive of the Year by CEO Monthly magazine.