3 Reasons Why Repealing/Amending Dodd-Frank Won’t Help Financial Enterprises

As if implementing 2,300 pages of regulatory framework weren’t difficult enough, U.S. financial institutions are now facing possible amendments to the Dodd-Frank Financial Wall Street Reform and Consumer Protection Act following the election of President Donald Trump. Even today, six years after Dodd-Frank was first introduced, the financial sector is still struggling to find the most effective approach to manage regulatory changes. Will scaling back some aspects of the legislation make it easier for financial services organizations?

The following three reasons explain why a full repeal, or significant amendment, of Dodd-Frank would likely create more headaches for financial enterprises:

  1. Slow Downs and Uncertainty – the Securities and Exchange Commission (SEC) responsible for executing the U.S. President’s executive order would be facing a difficult task, since each potential change to the act would be subject to a judicial review. That would likely slow down the process and create more uncertainty and difficulty for financial organizations that would need to adjust internal processes to comply with an evolving executive order.
  2. Upended Business Models – dismantling the law and replacing it with a new statute would upend financial institutions’ existing business models and divert even more funds to keeping up with the new regulation. Some banks have expressed their concern that things might get worse with new rules, even though the new administration’s stated goal has been to loosen up the banking industry and increase growth and job creation.
  3. Conflicting Global Regulations – regulators have been trying in recent years to improve the financial sector decision-making process to prevent another financial crisis like the 2008 meltdown. For instance, the U.S and the EU have somewhat overlapping regulations, with the European Market Infrastructure Regulation (EMIR) functioning as the EU’s equivalent to Dodd-Frank. There are many similarities in intention and scope. Rolling back Dodd-Frank would mean financial institutions with global activity could be forced to follow two sets of conflicting regulations, resulting in more regulatory uncertainty.

Such uncertainty would pose a challenge to traditional methods of change management and will increase the need to find a new, more agile approach to managing compliance and regulatory change.

A model-driven decision management approach would mitigate some of this added complexity and reduce the risk of falling behind on regulatory compliance. Implementing a new, innovative solution will increase transparency, automate business logic and reduce operational costs. In fact, this is a wise approach even if Dodd-Frank isn’t repealed or amended, to help create greater efficiencies and streamlined processes.

Here are some examples of how Decision Management can be utilized to streamline Dodd-Frank. It can:

  • Determine whether OTC derivatives clearing and reporting is required under specific market regulation once a trade is complete, reducing the risk associated with conflicting regulations for financial enterprises with a global presence in OTC derivative trading.
  • Create a designated decision model to assist in complying with capital requirements and leverage ratios (stress tests) that is easily managed and changed by the business.
  • Utilize decision models to manage mortgage underwriting standards and eligibility. Integrating data from the business will help determine borrowers’ risk and ability to repay.

If you want to learn more about how you can adapt to a new world of regulatory change by adopting a decision management approach, download our free white paper, Adapting to Regulatory Change: How Decision Management Presents a New Way to Look at Regulatory Change, or see our on-demand webinar.

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Maayan Zandberg

Maayan Zandberg possesses over a decade of experience in the financial services industry and is currently a Business Analyst consultant at Sapiens DECISION, where she delivers business transformation and change management projects to clients within the investment, banking and insurance industries. Maayan holds a CFA designation and previously held numerous positions within Capital Markets sales and trading.

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