Banks Offering Limited Services Due to Compliance Burdens

Financial products and services offered by banks are being issued on a a very limited basis due to regulatory compliance burdens.

According to the American Bankers Association’s (ABA) 2015 Survey of Bank Compliance Officers, a total of 46.3 percent of respondents said their bank had cut offerings for loan accounts, deposit accounts, or other services due to regulatory measures.

In addition, 46 percent of bank compliance officers reported their institution had decided not to launch a product, open a new channel, or had held off on entering a new market (temporarily or permanently) due to compliance concerns.

“It’s clear that the compliance burden brought on by Dodd-Frank has had an impact not only on banks, but more importantly on the customers and communities they serve,” said Frank Keating, ABA president and CEO. “This regulatory overcorrection has limited the loans, products and services available to consumers.”

The ABA administered the biennial survey via web from February 2015 through March 2015 to collect information about compliance officers and the compliance function practices at their bank. More than 450 financial institutions participated in the survey and 78.5 percent of this amount reported to be community banks.

According to the ABA, regulatory confusion affects customers as 33.8 percent of banks turn down otherwise creditworthy mortgage borrowers in an effort to comply with the Ability-to-Repay Rule. This rule mostly impacted banks with $1-$10 billion in assets. One-third of banks reported that they now only use qualified mortgage loans.

The ABA's analysis of the survey results also found 76.6 percent of respondents indicated that they perform enterprise-wide risk assessments, a majority of which are done annually. As the banks grow in assets, so does the percentage of institutions performing enterprise-wide risk assessments.

An increasing number of banks are relying on social media monitoring to handle their consumer complaint management process, the report says. A total of 51.3 of respondents use social media or other internet sites as a way to review comments about their bank–an increase from the 42.2 percent in 2013.

Source: American Bankers Association