The Cost of Compliance: How Will the Dodd-Frank Act Affect Financial Organizations?
The Dodd-Frank Act implements changes that affect the oversight and supervision of financial institutions, creates a new agency responsible for implementing and enforcing compliance with consumer financial laws, and introduces more stringent regulatory capital requirements. How will it affect your business?
In July 2010, the Obama administration signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law as a response to the financial crisis of 2008. Deemed as the most far reaching Wall Street reform in history, the Dodd-Frank Act is designed to prevent the excessive risk-taking that led to the 2008 financial collapse.
What is the Dodd-Frank Wall Street Reform and Consumer Protection Act?
The bill contains 16 major areas of reform, spelled out in roughly 2,300 pages. The provisions of the act are being implemented over a period of several years and are intended to decrease various risks in the U.S. financial system. These include subjecting banks to the possibility of being broken up if any of them are determined to be “too big to fail”. Additionally, the act establishes a number of new government agencies tasked with overseeing various components of the act and, by extension, various aspects of the banking system.
The Dodd-Frank Act creates a new regulatory framework by increasing transparency across financial transactions, mandating coordination among regulatory agencies, establishing new registration and reporting requirements for financial firms, and establishing a dedicated consumer protection agency.
The Cost of Compliance: 61 Million Paperwork Hours?
Needless to say, the numerous provisions of the bill have proven challenging to comply with, especially from a financial point of view. According to American Action Forum (AAF) research, Dodd-Frank has imposed more than $24 billion in final rule costs and generated more than 61 million man-hours worth of paperwork.
Regardless of how the Dodd-Frank Act plays out, financial organizations need to start preparing in order to remain compliant. One of the most crucial aspects of financial compliance is updating policies and procedures – how do you locate thousands of documents across the enterprise and update them to reflect the latest regulatory changes? The estimated 61 million paperwork hours across the financial industry seems like a scary number, but in reality the average cost to a financial organization can be significantly reduced by deploying an appropriate contract discovery and analytics solution.
Ultimately, financial organizations need to understand the impact and scope of the rule changes and then proceed with updating policies, procedures and documentation. Since the Dodd-Frank Act is designed to introduce new regulations to various financial products such as derivatives, financial firms will need to deal with the impact of an entirely new ecosystem of partners and ensure that all legal documents, policies and procedures are updated to reflect the regulatory changes.
Infinote’s powerful search and analysis capabilities enables users to quickly find all affected documents and determine the scope of the changes. Once reviewed, updates can be made across all documents with a click. In addition, a self-documenting audit trail provides management and regulators with information about any updates to that they can ensure the changes have been made accurately and comprehensively.