The 10th annual Regulatory & Risk Management Indicator survey, complied by Wolters Kluwer Compliance Solutions, has revealed regulatory change management as a key challenge for US banks.

These lenders are urged to implement suitable financial technology-enabled regulatory change programs to help alleviate the impact of such pressures, according to Wolters Kluwer.

The Indicator takes the pulse of the U.S. banking industry by measuring trend information on regulatory and risk concerns, realized and anticipated regulatory impacts on institutions, and the level of banks’ current risk management efforts. The survey’s data inputs generate a regulatory and risk management “pain index.”

“Unquestionably, this year’s survey findings point to the critical role that a robust regulatory change management program—particularly one featuring an up-to-date regulatory library—plays in helping ensure compliance and addressing  risk across a lending organization,” said Timothy R. Burniston, Senior Advisor for Regulatory Strategy with Wolters Kluwer Compliance Solutions.

Wolters Kluwer Compliance Solutions conducted the Indicator from July 27 to September 9, 2022 and generated 328 responses and a Main Score of 94, a decline from the 2021 score but a result closer to pre-pandemic scores. This year’s decline was driven largely by a significant drop in the dollar amount of regulatory penalties and fines and the number of associated enforcement actions compared to 2021. The Main Score is based on several factors, including the number of new federal regulations, number of enforcement actions, and the dollar amount of fines imposed on banks and credit unions over the past 12 months, together with survey respondents’ input.

When asked about the overall compliance and risk areas demanding their focus, respondents identified the ability to manage risk across all lines of business as their top concern (59%), closely followed by the ability to maintain compliance with changing regulations (58%), and ability to keep track of regulations (55%) and ability to demonstrate compliance to regulators (54%), all factors up by several points over last year’s survey.

Against the backdrop of technology’s increasing incorporation into banking practices and the rise of fintech, respondents also cited concerns about the continuing prevalence of manual processes and use of spreadsheets “sometimes or often” (85%) versus only nine percent rarely using manual processes.

The survey asked about lenders’ use of digital technologies to support their businesses. Nearly three-quarters of respondents indicated they have made some progress with digitizing their lending capabilities, although only 28% indicated their institutions have made significant progress or are fully digitized. Looking forward to 2023, top risk management priorities identified include cybersecurity (72%), compliance risk and credit risk (both at 51%), followed by operational risk and third-party risk (27% and 16%, respectively).