Restoring America’s Financial Stability

A Survival Guide – Part 1

The new “Restoring American Financial Stability Act of 2010’ will most likely be passed and signed into law in a few short weeks. It will change the face of the financial industry in the years to come. The impact will be significant and costly for those in the financial services industry.

Most smaller financial institutions most likely will not survive with the impact of the added regulations unless they implement cost effective solutions to address the increased reporting and regulatory requirements.

Institutions that were not previously included in previous financial regulations are now to be included in these sweeping changes. Insurance Companies, investment firms, hedge funds, derivatives, credit card companies and others managing other peoples assets now can be included by decree of the new Financial Stability Oversight Council (FSOC).

There are a couple of lessons we can learn from other previous major legislation, like Sarbanes Oxley:

• It will take a while to implement

• The creation of new government agencies to dictate standards to be audited will change a few times and make it seem like a moving target.

• Complying will be more a process problem than an accounting problem

• Audits will be inconsistent, at least in the beginning

• Audits will be more concerned with the intent and not necessarily following the letter of the law

·         However, it should not take as long to establish the FSOC and develop auditing standards since the financial industry is already one of the most regulated industries in America. The FSOC will be in a position to take the best and the brightest from a number of regulatory agencies. So organizations should not necessarily feel like they have a few years to get ready. Smaller banks and credit unions who traditionally reacted to audits instead of preparing for them may be surprised that they will not be given sufficient time to respond, it will be a brave new world for them.

There are a couple of things that are guaranteed from this new bill (although there will be some changes between now and when it’s passed):

• There will be a bigger role for government

• It will cost more for the financial institutions to react to these new regulations

• It will cost tax payers and consumers more for this “added protection”

• The big accounting companies are already in a hiring mode to be of assistance

• If the Supreme Court gets involved in making “adjustments” in a few years, the meat of the bill will not be altered.

 So what can an organization do to prepare for this upcoming regulation:

• Create a team to begin preparing and don’t wait until after your first audit, it may be your last.

• Become more familiar with your current procedures, it they are not documented, begin the process

• Educate yourself on the regulation, although there will be a reconciliation, the intent of the regulations should not change.

o   Perform a risk assessment of the processes most likely to be effected.

o   Review or create documentation on your current processes of lending, hedging funds, derivatives, etc.

o   Enhance your whistle-blower program

o   Review your records retention, document destruction policies

• Look for automated solutions to extract information from your existing data structures

 As the legislation passes and the FSOC is formed and starts publishing guidance, Visage Solutions will continue to assist our colleagues implement cost effective solutions to meet these and other regulatory requirements.

 Click here for the most current copy of the legislation

 Contact Visage Solutions today to see how we can assist you before it’s too late!

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About Visage Solutions – www.VisageSolutions.com

Visage Solutions is a consulting company operating in the areas of regulatory compliance, risk assessment, information security, risk management and compliance processes. Utilizing our proprietary SingleVue™ and OpsAudit™ methodologies, the company focuses on assisting business entities in mitigating operational risk. Visage has provided solutions to a client base ranging from private, entrepreneurial companies to large multinationals. Our team is comprised of experienced executives, managers and consultants who can assist clients with the development, implementation and execution of their risk management and compliance strategy.