Financial service providers that have invested in technology solutions are starting to see big returns on their investments. Regulators have made leaps this year to embrace electronic documentation and data collection, as well as other innovative solutions. First, the Consumer Financial Protection Bureau (CFPB) announced February a new policy to provide no-action letters to reduce regulatory uncertainty around the use of innovative products and services in the consumer financial space. Then, in March, the Office of the Comptroller of the Currency (OCC) published a white paper on how the agency can support responsible innovation in the federal banking system through the burgeoning financial technology, or ‘fintech,’ sector. The Federal Reserve is the latest to follow suit with a recent announcement that it will permit off-site examinations to certain financial institutions relying on electronic document and data submission.
On April 19, 2016, the Federal Reserve sent a memo to ‘smaller banks’ informing them of a new off-site examination program. State member banks (SMBs) and domestic branches of foreign banking organizations (FBOs) with less than $50 billion in total assets will be eligible for the program. Previously, Federal Reserve examiners could only review bank policies and certain internal reports remotely. Now as the Federal Reserve expands its technical capabilities, with developments “such as secure data transmission and electronic file imaging, examiners … have the ability to collect and review loan file information off-site without compromising the effectiveness of the examination process.”
The expanded remote examinations could reduce the burden on both regulators and regulated entities. Off-site capabilities cut back on the staff and time that banks would otherwise have to allocate for on-site reviews. This adds to the growing number of tangible benefits financial service providers are beginning to see from technology adoption. As regulators begin to embrace technology, financial service providers can not only see cost reductions and operational efficiencies, but also much need relief in meeting regulatory compliance and examination requirements.
In order to take advantage of these opportunities, however, financial service providers must first have the internal technology in place. To qualify for the program, financial service providers must demonstrate certain criteria are met. eLynx offers all of the solutions need to meet these requirements.
The Federal Reserve’s announcement asks the following questions; eLynx’s accompanying solutions follow each question.
- Will the institution submit the loan file data using a secure transmission method such as cloud-based collaboration products, secure email services, encrypted removable media, virtual private networks, or remote desktop control services?
eLynx’s platform provides for the secure and encrypted transfer of mortgage loan documents, as well as storage when needed
- Is the institution able to provide loan data and imaged loan documents that are legible, easily viewable, and properly organized to allow for timely review by examiners?
eLynx provides a robust solution that allows users to easily view, store, manage, download and export all loan documents and associated data through an easy-to-use interface, making it possible to support off-site regulatory examinations.
- Are the loan files comprehensive to allow an examiner to come to a conclusion as to the appropriate rating of a credit without having to request additional information from the institution?
eLynx supports comprehensive loan reviews by providing detailed loan-specific activity and history reporting, in conjunction with the management and organization of all documents and related data, to streamline examinations for the financial institution.
Although the new program is optional, it signals a gradual transition towards enhanced technological capabilities and investments with the specific intent of increased off-site examinations. The Federal Reserve notes that it will continue to “perform on-site those activities that require physical observation such as transaction testing and direct monitoring of an institution’s operations and internal controls,” but regulators, including the CFPB and OCC, are trying more and more to integrate technology to streamline the supervision process. Financial service providers, who recognize this trend and get out in front of it, have the most to gain from early adoption, including near-term cost savings and operational efficiencies. With many financial service vendors, such as eLynx, at the forefront of such technology, they can serve as an invaluable partner in developing the capabilities needed to succeed in the regulatory environments of the future.