What’s next for financial services is on everyone’s mind after the recent failure of Silicon Valley Bank.
I’ve worked in the financial services industry for over 20 years and have been reading a lot since hearing the news of SVB.
On one hand, I can’t help but be reminded of the 2008 – 2012 recession triggered by bank failures and the mortgage crisis.
On the other hand, it feels different this time because the government is reacting faster to prevent another financial crisis like 2008, and there are more regulatory controls in place.
Regardless of what unfolds with SVB and others, one thing is true — when these things happen, it creates a whole new level of compliance and regulatory scrutiny.
Financial System Today vs. 2008
The industry has changed a lot throughout my career, but regulatory issues have always been constant. See my article from two years ago, Are You Really Ready for Your Next Visit from the Consumer Finance Protection Bureau (CFPB)? The level of regulation ebbs and flows, but during these times you will see it ramp up.
The banking industry is highly regulated and subject to government oversight to ensure the safety and stability of the financial system. In the event of a situation like Silicon Valley Bank or 2008, the government may take actions to intervene, such as providing financial support, bailouts, or implementing regulatory measures. I’m sure we will start seeing more and more press on regulatory agencies such as the CFPB, the OCC, FDIC, State Regulators, etc.
Last time this happened, government agencies started hiring like crazy and conducting many more audits and reviews of the banks. I see that all happening again.
Financial services continue to be in the age of digital transformation. Money management is much more digital now than it was in 2008. I was surprised there weren’t more runs on banks over the weekend with people wanting to get their money out after the news of SVB. I figured the run would be worse because Customers now rely heavily on digital and can access their money much quicker than in the past. Regardless, financial services are different than they were 15 years ago…and this will affect regulatory changes in the months ahead.
We have been here before. Financial institutions must proactively find and fix any issues with technology, compliance, and where the two overlap. This is where SingleStone excels — we have both sides covered. We see how technology and regulation are sometimes treated separately, but now they are woven together. We also see how technology reacts to new regulatory environments and know how to help.
Technology
Back during the 2008 crisis, technology was just a piece of the puzzle. Now, it will be heavily, heavily, focused on. Organizations will need to prove they are tracking things properly and that their technology complies with regulatory standards.
Here is how we can help…
Software. Dashboard tools for managing internal reports that track how you’re doing from an operations and compliance standpoint.
Data. Data integrity and data governance are huge components of regulatory reviews. What is your data like? How do you know it is secure? How do you know it is accurate?
Cloud migration. We’ve helped financial services clients migrate to the cloud.
Program, Process, and Compliance Management
During regulatory times, people start picking apart your processes. At SingleStone, we are very skilled at going in and examining your workflow, your processes, and how it relates to technology. Then coming up with quick hits and quick wins to help you prepare for audits and closer examination.
New restrictions and requirements can have a ripple effect through your processes. You may have very little turnaround time to go in and change things. We can help you prepare and be ready for whatever comes next.
We evaluate your current state process and learn how things currently work.
We look at the new rules and regulations coming in, and any internal changes you want to make to create safety, soundness, and compliance.
We help you design and develop a future state process.
We train your people in the new processes, showing where you were, where you need to be, and where the gaps are.
We can manage the projects and initiatives created to resolve your issues.
We can lead your teams through the change management process.
Start Sooner Rather Than Later
There’s a great business phrase, “choose what not to work on.” If you work at a bank right now, you’re probably spinning with all the things you want to get done. But right now, you may have to make some decisions and choose not to do something that you really wanted to do or not build something you really wanted to build. Now you must focus on gaps, compliance, and regulatory issues.
Closely evaluate your technology and processes and look for gaps. Then, thoroughly prioritize which gaps are the riskiest and need the most immediate attention. Evaluate, prioritize, and focus on the most important.
Being prepared doesn’t guarantee a successful review. But it does provide focus and guarantee a better interaction with auditors, which will enhance any review in my opinion. The tide is turning and, sooner or later, regulatory issues will be knocking on your doorstep. So, what should you do? Prepare now.
SingleStone can help you find and fix the gaps before auditors do.