Change is never easy, but sometimes it’s heralded by a welcome event. Banks got important news out of Washington D.C. regarding the partial repeal of the 2010 Dodd-Frank Regulatory Act. Passed as a response to the financial crisis of 2007–2008, Dodd-Frank made changes to the American financial systems that impacted the entire financial ecosystem across the industry.
The changes, signed into law in May, will profoundly benefit super-regional, regional and community banks, as well as credit unions and trust banks. This regulatory easing is a boon for banks and trusts in general because it presents an opportunity to increase focus on important initiatives.
It’s important to note that these changes do not release these financial institutions from all regulatory responsibilities—or allow them to abandon the complete practices or established process of their current risk, governance and compliance structure. But it does free banks to double down on planned innovation initiatives: to save and invest more or for that matter, focus on gaining greater operational efficiencies and improve line-of-business as well as strategic alignment.
The bottom line is this: The easing beckons bank leaders to ask, “What can we do more of now?”
The best way to answer this question lies in exploring the possibilities from a perspective of people, process and technology.
1) People: time to repurpose
From a human capital alignment and deployment perspective, banks can now repurpose some risk and compliance/governance resources to improve alignment within and between different lines of business. This will drive overall strategy development and execution. Risk and compliance departments could be smaller and less complex, given the eased standards.
When resources in risk and compliance roles are redeployed to other groups, potential improvements to the strategic foundation of the enterprise become possible. This can occur through cross-pollination of other groups and lines of business with operational and risk resources.
This may also lead to new products and improved movement into new segments—with the added potential to cross-train existing resources to infuse lines of business with energy and ideas. The added resources introduces new perspectives and different backgrounds into the problem-solving spectrum of the existing group.
2) Process: improved efficiencies
With more time, money, and resources at hand, banks can now improve the processes that bolster security, operational efficiencies and organizational completeness.
This can lead to improved acquisition strategies and greater lending, as well as a stronger security posture and situational awareness from a risk management perspective. In the cybersecurity realm for example, banks can now take this complex issue to the next level of sophistication and make their institutions ironclad safe.
3) Technology: transform digitally
Community banks now have more capital and resources to invest in technologies and projects that digitally transform the customer experience and promote operational innovation.
Existing services that drive omnichannel experiences could also benefit greatly. With more time and resources, omnichannel can attract and retain customers. High-tech and innovation investment can also yield the right kind of automation that removes manual processes and eliminates redundancy within financial institutions. This includes the possibility of removing “business as usual” activities that tend to drain resources and operational expenses.
Putting it all together: Change is good to go
While change is never easy, this time it marks a welcome event for smaller banks and financial services institutions. Recently liberated banks that take the most advantage of opportunities stemming from the Dodd-Frank overhaul stand poised to lead in their sector in the coming years. Customer trust and confidence will grow as a result.
But making good on the potential gains will require careful planning and partnerships with outside firms that can help banks maximize their resources, time and money.
From a people, process and technology perspective this change in regulation at least guarantees that mid-sized and smaller banks will spend the next several quarters analyzing the exact implications of this lifted regulation. In the wake of regulatory change from the outside, banks now have a beyond-golden opportunity to change from the inside.
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