Legislation in the financial industry is changing the compliance landscape for banks and financial institutions. Proactive companies can turn regulations into opportunities to educate the consumer and mold public perception while fostering an adaptive compliance culture through internal training.
Heard on the Street
Last week I had the opportunity to meet with a client in the insurance and financial services industry. The topic of change in regulatory compliance came up with specific discussion around the new classification of Systemically Important Financial Institution (SIFI). The client mentioned that because of their classification, as a non-bank SIFI, Federal Reserve auditors were literally moving into their offices as part of an ongoing monitoring, analysis, and reporting process that was to be implemented at every SIFI and non-bank SIFI classified institution. The pendulum swing back, caused by the “too big to fail” bailouts, is gaining momentum with a host of potential implications.
Who is Affected and How?
The non-bank SIFI designation process is intended to provide regulators with enhanced oversight of companies that are not banks but play a critical role in the US financial system. The SIFI designation indicates considerable additional scrutiny for a company. Once a company has been voted on by the Financial Stability Oversight Council and receives a SIFI designation, the company will be subjected to new rules and supervision.
To appreciate the dynamics that this regulation (Dodd-Frank) and designation (SIFI) may introduce, each potential SIFI organization must go through a Quantitative Screening process, a Qualitative and Quantitative Assessment, and an In-Depth Analysis. This process uses the following assessment criteria and categories of review to determine if they go to the next level of scrutiny:
By its nature, the SIFI designation may have systemic implications on an organization that receives this classification. David Hirschmann, the president of the Chamber of Commerce’s Center for Capital Markets Competitiveness said, “This rule may force companies to start changing their business model or cease offering certain products and services.”(2)
The impact of this legislation will be far-reaching though not entirely known as we consider some of the implications of companies having to address compliance requirements around liquidity, single-counterpart credit limits, debt-to-equity limits, early remediation requirements, and overall risk management practices.
The ripple effect from this new legislation will ultimately impact training, learning, communication, messaging, and marketing within and without a SIFI designated organization. Areas that may be directly affected include a company’s business model, change management process, compliance culture, adjustments to product and service offerings, product and service knowledge training, and internal communication. This is where organizations can alleviate fears and foster trust with consumer education efforts.
An unforeseen opportunity for non-SIFI companies is to capitalize on the potential shifting of product and services offerings. Public perceptions of trust and pricing or cost model messaging is vital as SIFI organizations take on the additional overhead of burdensome regulation.
Allen’s expertise in compliance, change management, SOP messaging, product knowledge, consumer education, and brand training as well as internal and external communication puts them in a unique position to help SIFI and non-SIFI organizations to address the far reaching implications of this new legislation.
Best practices and success in other industries can have application in the financial services industry to influence public perception and mold company culture. Allen’s recent work on a large brand initiative with a Fortune 100 company is having significant operational and cultural impact on the organization. Strong messaging and brand education principles are helping the client to build trust, brand awareness and cultural change. Learners who have experienced the course have said, “Worth every minute… excited to be a part of this” and have thanked the C-Level team for “giving this (training) importance.”
If you are interested in talking with one of our learning directors about how Allen’s customer education expertise could help your organization contact us here.
1. Deloitte – SIFI Designation and its Potential Impact on Non-Bank Financial Companies
2. Dodd-Frank’s SIFI Designations to Hit Non-Bank Firms