How bank compliance leaders are engaging with regulators

• Key insight: Banks are facing the challenge, and opportunity, to rework their compliance protocols as regulators are enacting broad changes to bank reporting requirements.
• Expert quote: "A strong foundation will enable you to ensure that you are complying with consumer compliance no matter what the environment is." — Citi CCO Jennifer Taylor

As federal regulatory agencies are defining market structures in areas such as stablecoin regulation and enacting sweeping changes in bank regulation on multiple fronts, some bank compliance leaders are actively adjusting their risk management strategies.

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"It's certainly an exciting time to be in banking, especially in risk management and compliance," U.S. Bank Chief Risk Officer Jodi Richard said during a panel at American Banker's Most Powerful Women In Banking Conference on Wednesday.

Nicole Anderson, principal for FS regulatory advisory services at PwC, cautioned that agencies facing staffing cuts will be relying more heavily on banks to do the legwork of risk management.

"Regulators are already telling us, 'We don't have enough resources to come in and do the same things we used to do. If you can't show us that you really have identified the risk, understand the risk and have identified appropriate controls or control gaps, you're next in line for the criticism.' We were starting to see that a little before the [regulatory] shift, but this is now going to magnify that. It's a really good time to start thinking about the fundamentals of your risk management."

Kara West, chief enterprise risk officer for Capital One, said that banks have a unique opportunity in the current regulatory environment to "push back" and engage with regulators in new ways.

"To be honest, it's a pretty tough time for them – I'd hate to be a regulator right now," she said. "We are working with our regulators to think about where we can bring them along on the changes we're making. We feel way more openness than what we've seen before, and we're trying to take advantage of that and build relationships."

Richard said that there are also new opportunities for banks to customize and adjust their risk management approaches.

"It is a great time to be a risk manager," she said. "It puts you back in the driver's seat to make sure that you're allocating resources to the highest-level emerging risk where you actually feel there is exposure, driving that a little bit more than following things that might be more interesting to a wide set of banks but not as applicable to you."

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Even as compliance departments are re-prioritizing their risk focuses and incorporating new tools, such as AI, Citi Chief Compliance Officer for Banking and International Jennifer Taylor said that sticking to the fundamentals of risk management will help institutions. 

"A strong foundation will enable you to ensure that you are complying with consumer compliance no matter what the environment is," she said. "This more targeted focus of risk enables us to be a bit more forward-looking and to watch out for emerging risks, which is an important way to manage risk for this fast-moving environment."

Taylor noted that much of her bank's risk management had previously revolved around risks that had happened before, but she is working to challenge some of those assumptions.

"Some of the compliance reporting metrics were created because of the situation before and that metric continued to appear in compliance reporting for years after the metric wasn't delivering any value," she said. "Now, we constantly challenge ourselves on, 'What's the purpose?' Maturing will help us continue to manage risk appropriately from a safety and soundness perspective, no matter where we manage it."