The New Regulatory Environment

Posted by Don Woodland on Feb 13, 2013 10:47:00 AM

GSBLSU on the new regulatory environmentBanking in the new regulatory environment is a topic making banking executives cringe with anticipatory anxiety.   The financial crisis has ultimately led to the launch of the most encompassing and thorough revisions to banking, particularly concerning the regulatory aspect.  The goals of these regulatory initiatives look to increase the stability of financial sectors, to provide security to investors and consumers and to ease the difficulty of dealing with failing banks.

In May 2010, American Bankers Association President and CEO Ed Yingling wrote a letter of concern to US Treasury Secretary Timothy Geithner as the Senate and the House passed their reform legislations on to President Obama for review.  The sweeping reform packages submitted would add to the existing thousands of pages of banking regulation from before the financial crisis.  The letter detailed 80 new or expanded rules added and that the ludicrous irony of President Obama, the regulatory agencies, and Congress handing down these new burdens whilst still calling on banks to lend more, shows a severe disconnect between what is being asked of and expected from the banking sector.  A copy of this letter may be found here.

As the edicts continued to come down the pipe for banking regulation in 2011 and 2012, most banks held their breath as the waves of regulatory reform continued to crash.  Add to the ever growing laundry list of regulations for which banking executives have to figure out implementation strategies, a stagnant domestic economy and uncertain European climate, and it doesn’t take much scrutiny to observe that the banking industry has taken a path away from (and likely never to return to) historic banking returns of the pre-financial meltdown days.

Areas of Concern for Banking Institutions

The implications of the regulatory changes vary from bank to bank, but many of the problems are universal and far reaching.  Regulatory reform and the narrow window of time allotted for implementation has created a bit of a breaking point whereby the costs of reform outweighs the benefit of financial stability mandated by the new regulations, stemming from decreased lending and tertiary banking services and resulting in a very real and detrimental impact on the macroeconomic level.

Other changes expected for many financial institutions will show up in shifts towards more profitable services and away from the “full service” angle of recent years.  Other strategic maneuvers  may manifest changes and focus towards more basic banking strategies or investments in developing markets in order to capitalize on the higher growth rates.

While an air of contentiousness between banking executives and regulatory agencies can be felt during this very intense time of change and seeming misunderstanding, the very real concerns of the banking industry seems to resonate on:

  • The amount of time management will spend dealing with the implementation of and oversight on the ongoing, sustained regulatory changes at each of their respective institutions
  • The evaluation of the increased costs of the new regulations and the fundamental modifications to entire banking organizations and business structures
  • The speed now required for implementation of the regulatory reform, as forced by market pressures not necessarily from the dates set by the regulatory agencies, and the possible uneven effects on financial institutions as local regulatory agencies hand down enforcements.

For many banks, 2013 and beyond will be focused on implementation of the regulations.  Also in this time frame, banks will lay in planning for maneuvers to grow profitability in winning sectors and decrease floundering portions of their institutions. 

Dealing with the massive costs of the new regulatory environment will lead to scrutinizing assessments of existing business models and likely, innovative and ingenious new methodologies in banking activities.  However, the pain of that potential growth and the undoubted failure of some institutions will highlight the true repercussions of the new regulatory requirements, in that drastic and unprecedented change is going to happen and quickly.

 GSBLSU and Regulatory Changes

One of the truest and most reliable characteristics of a leader is their ability to read a situation and immediately implement an effective counter to manage it.  For most banking leaders, this is not an instinctive skill and is acquired over time, with experience and education.  The opportunity to gain education and real-world utilization of tried and true methods from accomplished faculty and seasoned contemporaries can be found in the strategic learning sessions provided by GSBLSU. 

Each year’s studies provide insights into how the new regulatory changes will impact each student’s institution.  We have highlighted the related courses available at the Graduate School of Banking at LSU, as they pertain to regulatory initiatives.  The full catalog may be viewed here.

First Year

Credit Risk Management

Monetary Economics

Strategic Bank Marketing

Second Year

Bank Regulatory Law

Bank Performance Analysis

Mergers & Acquisitions

Vision, Strategy, and Leadership

Third Year

Managing In The New Regulatory Environment

Bank Management Simulation

Bank Performance Analysis

Interpreting Economic Change

Troubled Asset Resolution

The Graduate School of Banking has compiled a whitepaper comparing GSBLSU and the traditional MBA.  Should you have an interest, it is free, and we will gladly email it to your inbox.  Simply click the abacus link below and fill in the form.  We respect your privacy and will never share your information.  If you'd like to head straight to our application page, simply click here.

Graduate School of Banking vs MBA

References:

http://www.ey.com/Publication/vwLUAssets/Making_the_right_moves_-_Global_banking_outlook_2012-2013/$FILE/Making-the-right-moves_Global-banking-outlook-2012-13.pdf
http://www.deloitte.com/assets/Dcom-Malaysia/Local%20Assets/Documents/FSI/US_FSI_2013BankingIndustryOutlook_pdf_111212.pdf
http://www.kpmg.com/us/en/issuesandinsights/articlespublications/press-releases/pages/kpmg-survey-community-banking-execs-see-regulatory-requirements-stifling-growth-driving-manda-activity.aspx
http://www.aba.com/aba/documents/press/SecretaryGeithner052610.pdf
http://www.aba.com/Press/Pages/banking_regburden.aspx
http://www.kpmg.com/HU/en/IssuesAndInsights/ArticlesPublications/Documents/Evolving-Banking-Regulation%E2%80%93A-long-journey-ahead.pdf

Tags: The New Regulatory Environment, Banking & Financial Regulatory Changes