The banking industry is bound to receive frequent regulatory changes via changes in law or directives from regulators. This is prompted by numerous reasons some of them being economic shifts, technological advancements and their emerging risks as well as maintaining stability in the ever-evolving financial landscape.
The changes in the banking industry often directly impact compliance requirements. Regulatory bodies may introduce new laws or modify existing ones to address emerging risks, enhance consumer protection, or adapt to technological advancements.
It is important for Financial institutions to stay abreast of these changes to ensure compliance, avoid potential legal issues and maintain trust with stakeholders. The ability to navigate these overlapping changes is a key aspect of adaptability in the banking sector.
To ensure reliable adaption of regulatory changes, Banks and FIs can employ some or all of the following ways;
- Employing skilled personnel whose purpose among others shall be to seek, analyze and circulate these regulatory changes to respective departments who will be required to adapt and implement said changes. In most cases, compliance personnel shall also train persons in respective departments to ensure an understanding of what the specific law requires. The personnel shall also create and enforce compliance plans and strategies which shall assist in the monitoring of compliance and mitigating risks related to non-compliance of specific laws.
- Investment in systems that shall make it easy to comply with regulatory and legal requirements. These systems can assist with compliance in regard to reminders of specific requirements of the law e.g. filing returns within a stipulated timeline. They also control and/or limit operations by ensuring mandatory requirements of the law are met. Embracing technology will greatly assist in minimizing errors and promoting consistency of banks and FIs in complying with current regulations and setting a foundation for adapting to new regulatory changes in the future.
- Emphasizing proper record keeping and management. A bank or FI should maintain accurate and detailed documentation of financial transactions, customer interactions, and internal processes. This thorough record-keeping serves as evidence of regulatory adherence, facilitates audits, and enables quick responses to inquiries from regulatory authorities. In the context of regulatory changes, detailed records help in tracking how the institution has adapted its operations to comply with new regulations. This historical data assists in demonstrating compliance during audits and regulatory reviews. Moreover, it provides a clear trail of the steps taken to adhere to evolving regulatory requirements, and this assists in the documentation necessary to navigate the ever-changing regulatory landscape.
- Regular review of policies. The reason is simply to align with current regulatory requirements. Banks and FIs are more likely to quickly identify and address any gaps or outdated practices through regular review of policies which forms a basis of departmental operational guidelines. The majority of the policies for banks and FIs are reviewed at least annually as required in various regulations issued by the Bank of Tanzania.
These highlighted tips are not exhaustive. Banks and FIs are expected to come up with more specific measures to adapt to the constant regulatory changes depending on their needs and operations. It is imperative that banks take note of and become agile in adopting regulatory changes to avoid penalties that come with non-compliance and reduce exposure to increased operational and financial risks due to missing out on essential safeguards introduced to address emerging challenges in the financial sector.