Innovative banking solutions

Banks Need to View Compliance Like Parkour Training

If you’ve never watched a video of someone doing Parkour, I highly recommend it. It’s usually a startling display of a highly experienced professional leaping across building rooftops, climbing fire escapes and flipping over obstacles much like a real-life Spiderman. The only thing missing is that they can’t shoot webs from their hands.

Watching one such video, I marveled (no pun intended) at the amount of time and effort the person must have put in to become so skilled. They must have wanted to quit so many times, especially in the beginning when aching muscles and injuries might have slowed them down or deterred them.

I was struck, then by the thought: banks need to become like Parkour masters.

Banking Compliance Is Difficult, It’s True

James Dimon, the CEO of JP Morgan, was quoted as saying that regulators are putting his bank “under assault,” and that “five or six regulators or people coming after us on every different issue . . . It’s a hard thing to deal with.”

This reaction is understandable. Compliance is expensive, time consuming, and complex to say the least—and it’s only going to get worse.

Regulator Standards Are Forcing Financial Companies To Review Strengths And Weaknesses

However, such intensive effort will empower financial institutions with stronger skills. As Ann Landers once said, “Opportunities are usually disguised as hard work, so most people don’t recognize them.”

For example, regulators are asking banks to ensure that the customer understands whatever agreements they are making with the banks.

Regulators are enforcing rules that banks are responsible for managing their third party vendor partnerships and are liable for any risks associated with them. For larger banks especially, this can be an extremely stressful and overwhelming regulation when the number of relationships can number in the thousands.

Currently, many banks’ core systems are out-dated and their departments are fragmented, which can slow processes down to an agonizing crawl.

Train For Banking Compliance Like a Parkour Master

Reactive processes of the past must become proactive processes for the future. Linking currently fragmented silos and systems on a single platform and bringing all parties together is the solution the industry has needed. Banks need to get past the aches and adjustment stage, and once they do, major opportunities and benefits are waiting for them.

However, to truly make these benefits and opportunities a reality, banks need to not only accept regulations as necessary, but to incorporate the reasons behind the regulations into their companies’ cultures. They need to train themselves in the art of “banking Parkour,” because changes are coming. And they won’t involve a simple jog in the compliance park.

The Compliance Marathon is Coming

RESPA-TILA goes into effect August 1st, 2015–mortgage compliance rules thousands of pages long–much of which requires changes in processes, policies and procedures at the most basic levels.

It is essential that your FI is proactive and has the policies and measures in place to monitor, measure and evaluate risks across the entire data, document and dollar path.

JP Morgan is one of the largest financial institutions in the US. In 2014, it added 2,000 outside consultants to its team of 13,000 compliance employees to address regulatory issues. However, it still seems to have problems with becoming compliant. This incident is a telling indicator that the industry as a whole is woefully underprepared for the upcoming changes

The days of reactive measures for financial institutions are gone.

It’s time to start training.

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