The Wall Street Journal dedicated some front page space to compliance professionals: Inside Enforcers Shake Up Bank Culture. It paints a stark picture of the regulatory pressure on banks.
There were many factors that lead to the 2008 Great Recession. Most people agree that a lack of oversight by regulators on the banks under their supervision contributed to the crash and the government bailout. The 2010 Dodd-Frank law was supposed to make the banking system safer than it was.
It has made banking harder and more complex.
Dodd-Frank was 200 pages of law that has lead to another 22,000 pages of regulatory requirements. Those requirements have spawned the fastest-growing component of the financial sector. Banks have hired tens of thousands of new compliance staff to implement and operate within in the new regulatory environment. The six largest U.S. banks spent at least $70.2 billion on regulatory compliance in 2013 which is double the $34.7 billion spent in 2007, according to a study by Federal Financial Analytics Inc.
Among the new federal banking regulations there is one that financial wonks call “TRID,” the TILA-Respa Integrated Disclosure rule.
Attendees at a recent training school here for bank compliance staff, who must learn and enforce such rules, said they deciphered TRID’s true meaning: “The reason I drink.”
According to the story, regulators sometimes struggle to decipher new rules the same way bank and their compliance professionals do. An interviewee discusses a months long discussion between the bank and regulators over whether it should let customers pay ahead on mortgages. And if they did, would the bank consider borrowers delinquent if they later missed a month?
Another bank official noted that it isn’t uncommon for regulators from different agencies to issue conflicting opinions. One of that bank’s regulators requested an exam. Two weeks later, another regulatory agency requested an exam. The two regualtors came back with different results.
TRID
Sources:
Nuns With Guns: The Strange Day-to-Day Struggles Between Bankers and Regulators by Kristen Grind and Emily Glazer in the Wall Street Journal