Frequently Asked Questions – Policy Management for Financial Services
Increasingly, policy management is becoming a critical function to ensure a financial services organization is financially sound and compliant with regulatory requirements.
What is policy management?
Policy management is the process of creating, updating, communicating, and tracking organizational policies and procedures.
How important are policies and procedures to financial services regulators?
Financial services regulators consider policies and procedures a critical part of every organization’s governance and risk management.
According to the Consumer Financial Protection Bureau (CFPB) Examination Procedures: “Examiners should seek to determine whether compliance policies and procedures are consistent with board-approved compliance policies and are maintained and modified to remain current and complete.”
What are the policy and procedure responsibilities of the board of directors and senior leadership?
The board of directors and senior leadership are responsible for ensuring the financial institution is operating in a fiscally sound manner in compliance with regulations.
One of the primary ways regulators expect the board and senior leaders to exercise this responsibility is with policies and procedures. Policies and procedures set the tone for the organization’s risk tolerance and support the compliance expected of each employee in their daily activities.
In particular, senior leadership:
- Ensures policies and procedures are created and updated to stay current with regulations and market conditions.
- Makes sure policies and procedures are reviewed and signed off on by the board.
- Makes sure policies and procedures are communicated, acknowledged, and implemented across the organization.
While the board of directors:
- Reviews and approves policies and procedures at regular intervals.
- Holds senior leadership accountable that the policies and procedures are implemented and followed.
What specifically do financial services regulators expect?
Regulators say that examiners need to ensure that in each organization:
- There are policies related to each financial service offered.
- There are sub-policies and procedures as needed that align with the policies.
- The policies are consistent with current regulations and updated in a timely manner.
- The policies are communicated effectively across the organization. Acknowledgement of policies is a minimum communication expectation.
- The policies, procedures, and their communication are tracked and can be reported on
The scope of regulator expectations is why a true policy management solution should be end-to-end, including creating, updating, communicating, and tracking organizational policies and procedures.
Unfortunately, financial services organizations often don’t meet regulators’ policy expectations. The Federal Deposit Insurance Corporation (FDIC) has said that policies are historically the leading category of “Matters Requiring Board Attention.”
What are common challenges with financial services policy management?
- There are policies related to each financial service offered.
- There are sub-policies and procedures as needed that align with the policies.
- The policies are consistent with current regulations and updated in a timely manner.
- The policies are communicated effectively across the organization. Acknowledgement of policies is a minimum communication expectation.
- The policies, procedures, and their communication are tracked and can be reported on
- Researching regulatory changes
- Identifying impacted policies
- Coordinating efforts to create and update policies
- Identifying appropriate policy language
- Documenting change decisions for regulators
- Communicating policy changes to all impacted employees
- Tracking employee acknowledgments
- Establishing a policy and procedure repository for employees
BAI analysis suggests that managing policies with disjointed processes takes at least 53% more time spent and overall cost.
What are the current policy trends in financial services?
There are three key policy trends in financial services to watch.
- More policies and procedures are needed. Almost every organizational growth strategy requires more policies and procedures—new products, new services, new markets, new technology, mergers, etc.
- Policies and procedures need to be actionable. They should be easy to locate, written in clear language, and include resources that make it easy to enact the desired behavior, creating a culture of compliance.
- Policy management software is increasingly being leveraged. As organizations are managing more and more policies, and technology is becoming more affordable, policy management software is becoming increasingly popular.
Where can I learn more about policy management?
To learn more about policy management, and how BAI can help your organization efficiently manage policies, go here or contact us today!
BAI Policy Manager
BAI has almost 100 years of experience in the financial services industry. Annually, we work with over 2,300 financial services institutions to help them improve their compliance programs.
The BAI Policy Manager is an end-to-end solution specifically designed to help financial services organizations make informed decisions when creating, updating, communicating, and tracking their organizational policies and procedures. BAI’s solution includes:
- Industry-specific regulatory resources to help you make informed decisions when creating and updating your policies
- Powerful communication tools to build a culture of compliance
- Focused processes, so you’re ready for your next examination
- Easy setup to help you get up and running quickly
