Pub. 13 2023-2024 Issue 5

A Message from the CEO: The Cumulative Cost of Regulation

Between regulatory agencies and legislative bodies whose aim is to mitigate risks, thousands of pages of rules are issued each year, often resulting in increased costs associated with compliance, which affects operational decisions from hiring and compensation to capital investments. Regulatory compliance also carries a high societal price tag.

Over the last six months, regulatory bodies like the Federal Reserve and the Consumer Financial Protection Bureau have introduced a number of new regulations that impact nearly every facet of the banking industry. Regulations carry the weight of law as they’re established with authority delegated by statutes and entail penalties for non-compliance. From slashing debit interchange revenue by more than a third to reclassifying overdraft services as “credit” subject to the Truth in Lending Act and Regulation Z, these regulations ultimately have far-reaching consequences on the availability of low-cost, full-service deposit accounts, which are meant to enhance financial inclusivity.

The Thomson Reuters 2023 Cost of Compliance Report clearly shows that the cost of compliance and risk mitigation over the past eight years has significantly impacted financial institutions. With growing workloads, made worse by the massive array of subject areas that compliance officers must understand, and the rising costs and challenges in hiring qualified compliance personnel, labor costs for financial institutions are skyrocketing. To read the full Cost of Compliance Report, visit

The lack of coordination between the Federal Reserve, CFPB and other regulators in imposing strict controls without consideration of potential cumulative consequences could drive consumers towards unregulated nonbank entities, thereby exposing them to heightened risks. For example, requiring too much data collection might make a borrower choose a less regulated entity that doesn’t require as much information. Regulators’ limited viewpoint overlooks the interconnectedness of regulations and how they collectively impact both service providers, like banks, and consumers.

A survey conducted by LexisNexis Risk Solutions found that costs have risen for 99% of financial institutions in part due to greater regulatory burden and reporting expectations. 79% of organizations reported increased technology costs related to compliance. Overall, compliance costs have increased by more than 60% compared to pre-financial crisis levels. Banks of all sizes are trying to find their new equilibrium in terms of cost, operations, capital and diversification.

For policymakers to establish a regulatory framework that fosters a resilient, equitable and flourishing financial ecosystem, they must conduct a thorough assessment of the combined effects of regulations.

CBA will continue to educate and call out policymakers whose agendas negatively impact not just the banking industry but Colorado’s economic well-being.

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