After this spring’s rapid collapse of Silicon Valley Bank, Signature Bank and First Republic Bank, the banking industry is closely measuring the possible regulatory after-effects. Those impacts may include closer regulatory scrutiny for both traditional and non-bank lenders, according to Kevin Wilzbach, director of product management at Wolters Kluwer Compliance Solutions.
“Depository institutions can expect closer scrutiny of financial positions and investment strategies. We’ll almost certainly see a push for more oversight by both federal and state authorities of risk management at nonbanks – not just mortgage banks, but fintechs, hedge funds, crypto, etc.,” Wilzbach said.
“The Financial Stability Oversight Council has already proposed rules that would facilitate the designation of nonbanks as systemically important, subjecting them to Federal Reserve supervision, and an ‘analytic framework’ that it would use when evaluating a company’s ‘potential risk or threat to U.S. financial stability,’” Wilzbach said.
“Data and analytics and advanced compliance systems are essential in preventing ‘failures’ in the broadest sense of that term – not only catastrophic financial events, but major, significant compliance problems that can create reputational damage. Data is a strategic asset, enabling deep insight into customer behavior, and informed decision-making,” Wilzbach said. “It also is essential in meeting compliance obligations, a core element in risk management and can be a competitive differentiator. Better data and analytics and dashboards can provide greater transparency for your C-Suite and Board. Data can also provide early warning signs for major lending issues, such as redlining, appraisal bias or to identify practices that could be deemed unfair or abusive.”
