U.S. regulatory authorities may be less lenient about bank accounting and reporting errors stemming from old technologies — like spreadsheets — particularly for repeat offenses. Banks could see 500% higher fines for errors stemming from outdated, problematic methods.

So predicts Bikram Singh, chief executive officer of Brunswick, N.J.-based EZOPS, a provider of an artificial intelligence (AI)-driven platform for automating data and processes for large financial institutions (FIs).

Almost all FIs have had to work through regulatory issues at some point, Singh noted, and these problems often “have to do with their management of data and the quality of data that they’re reporting — or not reporting.” Data may pass through multiple systems and various business processes, and still involves many manual tasks, he said.

“These are the repetitive tasks, the low-value tasks that have been done historically in Excel or Microsoft Access databases — things that are very error-prone, not scalable and are often bringing down the entire client service experience or delaying client onboarding and adding of new accounts,” Singh told Bank Automation News.

These outdated systems and processes are often the source of errors and are becoming greater liabilities for FIs, since automation and data management systems have long been able to replace and improve them, he added.

U.S. regulatory authorities “are now not in a very forgiving mood — they are playing offense, and they are fining organizational institutions who are repeat offenders,” Singh said. Especially for repeated errors, EZOPS expects FIs could see “a compounding effect” making fines multiple times higher than issued in first offenses.

Regulator concern about legacy systems

U.S. bank regulators have expressed concerns about the risks associated with outdated legacy systems, noted Ryan Stinneford, a partner at multistate banking and consumer financial services law firm Hudson Cook, LLP. For example, in its Dec. 6 Semiannual Risk Perspective, the Office of the Comptroller of the Currency (OCC) emphasized security and consumer protection risks from old software and technology, he told BAN.

“All outdated technology may present risks for banks and their customers,” Stinneford said. “The protection of customer and bank information would be at the top of the list of technology concerns.”

Federal Deposit Insurance Corp. (FDIC) Jelena McWilliams said at an April 2021 Consumer Bankers Association conference that her top concern for the banking industry is outdated internal processes and legacy software that “frankly, are impeding [banks’] ability to move forward.”

Ready, or not

Some banks and FIs are in a good position with data management, but Singh has seen FIs that “still have a lot of inconsistencies and gaps in terms of how they report data, and there is still a lot of dependence on manual processes.”

He’s not alone in those observations. In its 2022 CFO Outlook for Financial Institutions report with input from nearly 200 financial and banking executives, financial planning solutions provider Syntellis found that:

• 48% of respondents’ institutions rely on spreadsheets for incentive compensation;
• 39% use spreadsheets for budgeting and forecasting;
• 36% use spreadsheets for scenario analysis; and
• 34% use spreadsheets for profitability analysis.

Further, 43% of respondents said budgeting at their organizations takes 12 months or longer, up from 14% in 2020, according to the report.