Banking Finance Experts Consensus on Compliance in US Bank Holding Companies: An e-Delphi Study

Abstract

Compliance measures emphasized in the Dodd-Frank Bill 2010, Section 165 is a response to the 2008 financial crisis, that requires large banks to maintain a minimum capital ratio. The Federal Reserve Bank (Fed) regulates capital of Bank Holding Companies (BHC) through compliance Supervisory Capital Assessment Program (SCAP) 2009 and Comprehensive Capital Adequacy Review (CCAR) 2011 annual stress test of capital. The Fed imposed a minimum capital ratio of 8% that has derailed the risk management objective of capital adequacy, as bank managers are forced to take on more risk to meet the capital ratio. This study concerns senior manager practices that can be effective in meeting compliance requirements posed by the Fed for BHCs. Through a qualitative e-Delphi study, 10 banking finance experts were convened to build consensus on senior manager’s practices that can be effective in meeting compliance requirements. Data were collected from three electronic questionnaires submitted through Qualtrics. Data were analyzed using theoretical triangulation, coding, and thematic analysis. Four important considerations were identified that could bolster compliance measures effectiveness: (a) emphasis placed on understanding regulatory consultant compliance, (b) maintenance of effective and independent compliance align to organizational objectives, (c) clear definition of data source for compliance analytics. These considerations of compliance practices may help senior bank managers reduce risky behaviors and investments that cause significant bank losses.

Case Study on a Potential Application of Failure Mode and Effects Analysis in Assessing Compliance Risks

“…The examination of the group-level agreement shows that the agreement between the compliance experts of the bank is significant, as the Kendall W value is significant in all cases and close to 1.0. However, using a simple majority to indicate a group's agreement level (Velez et al 2020) is a possible option. As for decision support, Kendall's rank concordance coefficient provides more detailed information.…”

“…On the organizational level, an e-Delphi-based study presented a possible option for focus group consensus making, related to assessing compliance issues using the questionnaire technique (Velez et al 2020). However, the level of agreement between the evaluators was calculated only using a simple majority without further statistical analysis (providing more detailed information to the decision-makers); the study introduced a novelty in assessing compliance issues.…”

“…The FMEA methodology can be used to assess the risk of potential or existing failures of specific processes and prevent their occurrence. According to Chapman (1998), the qualitative methods are usually represented by the nominal group technique (Coker et al 2014), the Delphi method (Velez et al 2020) or the brainstorming technique. In general, the evaluation processes can be managed based on focus groups (Sutton and Arnold 2013).…”

Preventing the money laundering and terrorist financing risks of emerging technologies: An international policy Delphi study

“…By doing so, panellists are informed of the level of dissent or agreement compared to their own responses, allowing key points of consensus or dissensus to emerge as the rounds progress (Iqbal & Pipon-Young, 2009). The method has become popular in assessing future scenarios in several industries, including healthcare (Chang et al, 2010;Keeney et al, 2006), technology (Alon et al, 2019;Merfeld et al, 2019), finance (Kozak & Iefremova, 2014;Velez et al, 2020) and, to a lesser extent, crime (Coutorie, 1995).…”

Use of the e-Delphi Method to Validate the Corporate Reputation Management Maturity Model (CR3M)

“…The narrow scope of the field covered by the model (a limited number of expert theorists) and the depth and specificity of the required specialist knowledge made the selection of a panel of experts used a deliberate approach. In fact, there is no set of universal guidelines for qualifying experts for a Delphi panel [47]. In this study the panel of experts was selected on the basis of their knowledge or professional experience in corporate reputation management.…”