It’s planning season – is regulatory compliance a top priority?

When looking for great insights into the priorities that banks and credit unions should be focused on for 2020 and beyond, one good resource is the white papers published by the so-called Big Four professional services companies, KPMG, EY, Deloitte and PWC. These four companies audit 99% of the largest 100 companies in the world, including the largest financial institutions.

One of the better reports that I have found is the PWC report titled Retail Banking 2020 – Evolution or Revolution.

PWC surveyed 560 client executives from leading financial institutions across 17 markets regarding the challenges and opportunities they see for 2020 and beyond. Those priorities shook out as:

  1. Developing a customer-centric business model
  2. Optimizing distribution
  3. Simplifying business and operating models
  4. Obtaining an information advantage
  5. Enabling innovation and the capabilities required to foster it
  6. Proactively managing risk, regulations and capital

There’s obviously a lot there to think about in every credit union’s strategic planning, and most progressive credit unions are addressing these priorities in some form or fashion.

Interestingly, when PWC probed further to identify the top three challenges for U.S. banks, regulatory compliance topped the list with 43% of banks listing it, while 35% listed “attracting customers” and 33% listed “increasing customer profitability.”

And even on the list of top three investment priorities, regulatory compliance came in first again with 56% listing it, followed by “enhancing customer service” at 46% and implementing new technology at 30% in the third spot.

What was even more striking is that 90% of these mostly larger bank executives believe that these priorities are important, but only 20% feel very prepared to address them.

Hence the management dilemma that we each face – that is, it’s one thing to know what the challenges and opportunities are, and an entirely different matter to feel prepared to meet them.

So, for credit union executives, especially for those with more limited resources, I wonder, have you made regulatory compliance one of your highest strategic priorities and if so, what are the activities, tools and resources that you plan to use to help manage risk, including compliance risk?

State credit union leagues and associations have long placed regulatory advocacy and support as one of their highest priorities and CUNA has as well. And now, a lot is happening in the credit union industry with the evolution of great tools and resources for credit unions.

Credit union leaders tend to look at regulatory compliance as a three-legged stool with advocacy, information and implementation tools all being important. State leagues and CUNA play a vital role in helping to coordinate advocacy efforts with the goal being to streamline, simplify or eliminate unnecessary regulations that stifle member service and create high costs of compliance. In credit unions’ plan priorities, they should be sure to emphasize their commitment to support these efforts by helping to identify issues that need attention and by getting engaged in collaborative grassroots lobbying efforts.

The second leg is compliance information. State leagues all provide access to great compliance information, with over 90% of Leagues doing so through a product called InfoSight powered by a consortium of leagues who formed the company, League InfoSight. InfoSight provides affiliated credit unions with federal and state-level content on current and pending regulations with insights for setting priorities for compliance. These resources are provided as a part of membership dues. Most of these leagues also offer access to a library of model policies to help comply with regulatory demands for the associated policy language. And certainly, CUNA’s great compliance resources and content are integrated with these state league InfoSight platforms as well.

What credit unions can do in this area is to make sure that they know about the resources available and take advantage of them. And equally important, provide your league with input on how well they are meeting your compliance information needs. They all want to excel in this area, and two-way communication is critical.

The third leg of the compliance stool is implementation tools. Two leading products in this space are ComplySight and AffirmX. Over 300 U.S. credit unions currently use one or both of these products. Both are very different. ComplySight is a simple software product that helps inventory federal and state regulations, providing a tracking tool for internal compliance audits. It is usually most effective for credit unions who have some strong internal compliance expertise and it tends to replace spreadsheets and other do-it-yourself systems.

In the case of the AffirmX Risk management service, credit unions gain access to a Risk Intel Center platform. It draws on internal data sources as well as external data to improve the way credit unions prioritize risk management and compliance tasks and remediation. The platform generates reports for internal purposes as well as for examiners who want to understand how the credit union is managing risk and compliance in particular.

Both of these solutions are now owned by a CUSO called AffirmXCU, LLC. It is owned by Maryland-based servicing partner AffirmX, CU Solutions Group and five regional leagues, which include Mountain West, Maryland/DC, Cornerstone, Indiana and Connecticut. League InfoSight, a consortium of 15 state leagues, will also soon have ownership in this product-centric company.

Close to 30 leagues sell and support one or both of these products, and the mission is to help credit unions of all sizes gain access to the important implementation tools for regulatory compliance and risk management.

AffirmX CEO Ken Wolff has likened ComplySight to a vacuum cleaner while the AffirmX risk platform is the housekeeping service. This is an interesting analogy when thinking of how messy a job regulatory compliance can be and how every credit union should want to keep a tidy house when it comes to compliance, whether they want a do-it-yourself product like ComplySight or a more outsourced full-service platform like AffirmX.

So, as credit unions approach this planning season for 2020 and beyond, I hope that all will make regulatory compliance a top priority, just as the largest banks are doing all across the U.S.

And here is a great quote from the PwC Retail Banking 2020 report:

“Regulators do not want banks just to be correcting mistakes, nor to be ticking boxes. Rather, they want banks to embrace regulatory intent, and create sound, secure, unbiased businesses, where regulatory compliance and sound conduct is embedded in the processes and values of everyday operations.”

Nothing can be more disruptive or time-consuming for a credit union than the impact of non-compliance with important regulations or the reputational risk associated with inadequately mitigated enterprise risk.

If you would like to demo one of these products, just reach out to Brandi Stankovic or Melia Heimbuck at CU Solutions Group and we can connect you with either your league partner or with a direct link to the product demo of your choice.

CU Solutions Group has worked with CUNA and state leagues for over 16 years to develop and invest in great regulatory compliance tools that help credit unions succeed. We plan to double down on this important priority with our league partners to help credit unions address this and other top planning priorities in the future.

Dave Adams

Dave Adams

Dave Adams is  President / Chief Executive Officer of CU Solutions Group. The  CUSG office is located in Livonia, Michigan. Mr. Adams joined the Michigan Credit Union League in August of ... Web: Details