CUs Pay High Q3 Compliance Costs
As air temperatures around the country cooled, financial regulators have turned up the heat on credit unions and banks.
For the third quarter of 2014, the needle was pointed directly at hot, according to Pam Perdue, EVP of regulatory insight for Continuity Control, a New Haven, Conn.-based financial technology firm.
“This surprised us a little,” Perdue told participants during an Oct. 9 recorded webinar. “We were expecting some increases, but not quite this much.”
Using Continuity Control's Bank Compliance Index, which measured the impact of regulations faced by a hypothetical $300 million community financial institution, Perdue rated third quarter performance at a BCI rank of 1.86. The number refers to how many full-time equivalents were required to deal with regulations imposed between July 1 and Sept. 30 this year.
“Compliance is not a singular thing, but more of ‘death by 1,000 cuts,’ and rarely is a regulation ever repealed,” Perdue said. “I only remember one reg that has been repealed in 25 years for anything other than technical reasons.”
BCI's 1.86 FTEs found themselves dealing with some or all of 82 new regulatory items totaling 3,403 pages that consumed roughly 653 staff hours for the index's hypothetical institution, according to Perdue.
At $45 per hour, a salary figure on the rise due to declining unemployment and increasing market demand, compliance with new regulations during the third quarter cost financial institutions $45,264.
During the second quarter, which earned a lower BCI, 1.48 FTEs dealt with 75 new regulatory actions comprised of 2,884 pages that consumed 517 staff hours at $34,755, according to the BCI parameters, Continuity Control's data showed.
The third quarter also resulted in 150 enforcement actions against institutions, including a rise in enforcement actions against credit unions fined for submitting call reports after the deadline, according to Continuity Control. The EA rating topped out at 9.01%, which actually declined from the second quarter's EA rating of 10.10% and 170 enforcement actions.
The NCUA cropped up specifically in two areas. The agency is proposing changes to the aggregate limit on fixed asset investments and partial occupancy requirements. Comments to these changes were due Oct. 10. The agency's actions against late call report filers also ranked among the most significant enforcement actions.
During the third quarter, the NCUA fined 64 credit unions, including a $20,000 penalty for one that filed its call report 22 days late, Perdue said. Still, enforcement actions against banks, by comparison, were greater in number and weighed in at much higher monetary penalties.