Consumer Financial Protection Bureau Counts Bank Regulatory Cost

The Consumer Financial Protection Bureau has released a report detailing the costs that banks face in complying to regulation.

With a case study approach, the CFPB interviewed employees and gathered data on compliance actions across departments of banks, rather than focusing solely on the departments tasked with compliance. This gives a more accurate picture of the costs and tasks that different personnel have to carry out from the top down. There’s also a substantial amount of third-party costs, so just tallying up invoices and crunching numbers would be time consuming and give only a rough estimate.

The CFPB emphasized that personnel interviews and follow-up interviews gave a better picture of the day-to-day actions as an overview of company operations, rather than as a compartmentalized function.

This study included seven participating banks of different tiers, and data shows the cost of compliance spread across eight departments:

The CFPB focused on four regulatory requirements that emphasized consumer opt-in/out (such as overdraft protection), error resolution, disclosure to consumers, and advertising standards for financial products and services.

Ultimately, the CFPB found that smaller banks, Tier 4A and 4B, faced proportionately higher costs for remaining compliant.

There is much debate of the true cost of regulation for the banking industry, and this report, though just scratching the surface, is one of the first of its kind. The study isn’t extensive enough to draw an overarching conclusion, but it’s definitely a great first step in understanding the true costs of regulation.

The full report can be found here at www.consumerfinance.gov.