For the second consecutive year, regulators issued more than 600 enforcement actions against financial institutions, according to experts at Continuity (formerly Continuity Control), a New Haven, Conn.-based provider of automated compliance solutions for financial institutions.
The sustained increase indicates that community institutions must be prepared to address increasing complex compliance issues, the firm said.
Continuity's Q4 2014 Banking Compliance Index found that the average community bank needed to devote more than $147,000 to manage the 302 regulatory changes introduced in 2014.
Over the course of the year, the equivalent of 1.57 full-time employees were required to manage the incremental burden, which was a decrease from the previous year, according to the index.
Despite the small decline in the BCI, the enforcement action rate held steady and financial institutions paid enforcement action-related penalties of $4.6 billion in 2014.
"The rate of escalating enforcement actions isn't a surprising development — these levels represent the new normal," Pam Perdue, Continuity's EVP of regulatory insight, said.
She added, "Over the past couple of years, we have consistently seen more than 130 enforcement actions each quarter. The sad reality is that many of these enforcement actions are stemming from older regulations that bankers have years of experience addressing."
More than 4,000 pages of regulatory changes emerged in Q4 2014 alone, but many enforcement actions focused on older regulatory statutes, including the Bank Secrecy Act and related anti-money-laundering laws, as well as safety and soundness standards.
"The enforcement action data shows us that community financial institutions need to pay attention not only to new regulatory changes, but also to existing rules they've known about for years," Perdue said. "To keep pace, community financial institutions must modernize the way they handle compliance if they want to successfully balance existing obligations with regulatory changes."
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