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Enforcement actions in the banking industry: Trends and lessons learned

Regulators issue hundreds of enforcement actions to banks each year. Recent research sheds light on current trends in the number, type, and severity of these actions, with implications for ways that banks may be able to better anticipate and respond to them. Read this infographic and read more here: http://dupress.com/articles/bank-enforcement-actions-trends-in-banking-industry/?icid=hp:ft:01.

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Enforcement actions in the banking industry: Trends and lessons learned

  1. 1. Enforcement actions in the banking industry Trends and lessons learned Enforcement actions (EAs) are issued against institutions and individuals for violations of rules or unsafe practices affecting safety and soundness of the financial system and/or consumer protection. As such, EAs offer some of the most concrete evidence of risk management and compliance issues in the banking industry. Scope of the study We used the SNL Financial database and followed its EA classification to analyze trends in enforcement actions in the banking industry over the last 15 years.   Type of EA 15 formal actions as classified by SNL Financial Institutions covered Banks, bank holding companies (BHCs), thrifts, thrift holding companies, credit unions Analysis period January 1, 2000– August 27, 2015 Overall trends Overall number of EAs returning to normal levels… Total number of EAs 2000 533 1073 1795 698 318 1500 1000 500 0 2000 2005 2010 2015* Source: SNL Financial and Deloitte Center for Financial Services analysis Regulators The Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency (OCC) (and the Office of Thrift Supervision), the Federal Reserve System, the National Credit Union Administration, and the Consumer Financial Protection Bureau “The enforcement actions we are issuing today make clear that the OCC will take forceful action, not only when the institutions we supervise engage in wrongdoing, but when management fails to exercise the oversight necessary to ensure that employees follow laws and regulations intended to protect customers and maintain the integrity of markets.” – Thomas J. Curry, OCC, November 20141 1 “OCC fines three banks for $950 million for FX trading improprieties,” OCC press release, November 12, 2014, http://www.occ.gov/news-issuances/news-releases/2014/nr-occ-2014-157.html, accessed October 1, 2015. …and so is the composition Severe and less severe EAs 100% 75% 50% 25% 0% Severe EAs Less severe EAs 2000 2005 2010 2015* 22 78 21 79 25 75 17 83 18 82 9 91 15 85 20 80 31 69 52 48 56 44 41 59 35 65 22 78 18 82 17 83 Copyright © 2015 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limited *Data covering EAs up to August 27, 2015. Average (2000–2014): 880# # Average estimate excludes 2015 EAs, as full-year data were not available at the time of analysis. 592 545 700 798 641 582 906 1247 939 1563 583 Source: SNL Financial and Deloitte Center for Financial Services analysis
  2. 2. The Deloitte Center for Financial Services offers actionable insights to assist senior-level executives in the industry to make impactful business decisions. Differences in EAs by size of institution Issues triggering severe actions against institutions Large institutions (Total assets over $50 billion) Midsized institutions (Total assets between $10 billion – $50 billion) Small institutions (Total assets less than $10 billion) • EAs against individuals are declining to pre-2008 levels. • However, there is a marked increase in EAs against large institutions in the post-2009 period. • Total EAs have decreased below pre-2008 levels, due to lower number of EAs against individuals. • EAs against midsized institutions continue to remain low. • Total EAs are nearing pre-2008 levels, largely due to lower EAs against small institutions that had risen between 2008 and 2010. • EAs against individuals demonstrate a stable trend. EAs against large institutions EAs against individuals/institution affliated parties (IAPs) at large institutions 0 0 0 10 5 350 20 10 700 30 15 1050 40 20 1400 300 140 600 225 105 450 150 70 300 75 35 150 0 0 0 2000 2000 2006 2006 2012 2012 Although the number of EAs has declined in recent years, one may expect banking supervisors to remain aggressive in their penalties and to expand the types of issues they will proactively monitor. Deficiencies in residential mortgage servicing and foreclosures (for large banks) Concerns over financial soundness of the institution/BHC (for midsized banks) BSA/Anti-money laundering compliance (for both large and midsized institutions) Violation of Section 5 of the Federal Trade Commission Act (for both large and midsized institutions) Interest rate risk Credit risk Cybersecurity Issues triggering severe EAs against large and midsized institutions since 2008 Issues expected to receive regulatory attention in the near future Strong to defend • Institutionalize the processes related to existing laws to foster compliance with newer regulations • Provide training to bank professionals on individual accountability Vigilent to detect • Believe in the power of self- policing and proactive reporting • Strengthen board oversight of compliance programs Prompt to respond • Maintain a proactive dialogue with regulators • Establish an open and collaborative relationship with regulators To learn more, contact: Chris Spoth Executive Director Deloitte Center for Regulatory Strategies Deloitte & Touche LLP +1 202 375 5016 cspoth@deloitte.com Val Srinivas, Ph.D. Research Leader, Banking & Securities Deloitte Center for Financial Services Deloitte Services LP +1 212 436 3384 vsrinivas@deloitte.com For more information and to download the full report, please visit www.deloitte.com/us/banking-enforcement-actions As used in this document “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. Copyright © 2015 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limited Lessons learned Source: SNL Financial and Deloitte Center for Financial Services analysis Deloitte Center for Financial Services Contact To learn more about the Deloitte Center for Financial Services, its solutions, thought leadership, and events please visit: www.deloitte.com/us/cfs Subscribe Subscribe to recieve financial services insights via Quick Look blog at quicklookblog.com/subscribe/ Engage Follow us on Twitter at: @DeloitteFinSvcs EAs against midsized institutions EAs against midsized individuals/IAPs at midsized banks EAs against small institutions EAs against individuals/ IAPs at small banks An effective risk management and compliance system is one that is strong, vigilant, and prompt. Institutions can consider the following strategies to better anticipate, respond, and possibly avoid future enforcement actions. 2015* 2015 2000 2006 2012 2015 *Till August 2015