New regulations may cost banks a significant sum and they will likely need to revise their processes to ensure they are in compliance. This means many branches may need to increase their customer retention strategies and attract new business by providing the most efficient services possible.
Regulatory costs could present a new challenge for financial institutions
While the Dodd-Frank Wall Street Reform and Consumer Protection Act was initially intended to protect individuals and prevent another financial crisis, it had several unintended consequences. One of the significant impacts is the cost of implementation in order to remain compliant. However, it appears no one yet knows exactly how much the reforms will impact financial institutions.
A new research report from the Federal Deposit Insurance Corporation (FDIC) revealed few banking professionals or politicians seem to understand what costs will be associated with Dodd-Frank compliance and how these rules will take effect. Even the FDIC was unable to determine what impacts the legislation will have in the long run.
"The study tried to examine how regulatory costs for community banks have changed," read the study's executive summary. "Measuring the effect of regulation remains an important question that presents substantial challenges."
Streamlining processes even more essential
As banks are required to adjust processes in order to comply with Dodd-Frank regulations, they may find it increasingly necessary to implement the most efficient and updated processes that can help them cut costs, enhance their reputations and gain new customers. Having access to the latest cash management strategies is important for institutions looking to make the most of available resources, but banks are also employing new strategies to ensure they comply.
Hiring compliance officers is one way banks are taking the initiative to update processes and guarantee they abide by all regulatory requirements. By having an executive or department dedicated to compliance, a financial institution can ensure it doesn't miss anything. Staying abreast of Dodd-Frank and regulatory updates is also essential; banks that are in the process of updating processes to comply could find a slight rule alteration renders their progress insufficient and could make them noncompliant, making it important to be aware of changes.
April 18, 2013