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ComplianceJuly 18, 2023

Today’s volatile banking environment demands loan asset certainty

Elevated interest rates, aggressive regulatory oversight, and the threat of a looming global recession ― have compounded a lending landscape already fraught with challenges. And the Federal Reserve’s series of aggressive interest rate hikes has sparked a number of repercussions.

To effectively shield against these and other risks, keep pace with everchanging regulatory measures, and maintain and demonstrate compliance amid the uncertainties of a precarious market, protecting lending asset integrity has never been more vital. And enabling asset certainty is a fundamental cornerstone of these mitigation efforts. Because asset certainty represents the obligation to pay, there must be absolute assurance of judicial admissibility, legal enforceability and regulatory compliance. Digital asset certainty provides the assurance that digital loans are compliant and meet all legal requirements and industry best practices. 

Digital lending minimizes compliance risk

Today’s regulatory environment is far too complex for organizations to effectively manage compliance without the help of technology and automated processes and resources. Continued reliance on manual processes is a primary factor that is tangling compliance administration for the banking industry ― notably in tasks such as tracking and maintaining new and changing regulations, as well as collecting, analyzing and reporting on regulatory required data.

Managing compliance risk clearly remains an ongoing challenge for banks. When respondents in the 2022 Wolters Kluwer Regulatory & Risk Indicator survey were asked to identify the top obstacles to implementing an effective compliance program, they cited manual processes (54 percent) as the greatest hurdle. Even more, when queried about their ability to track and demonstrate compliance, more than half expressed concern, and nearly 60 percent reported to being unsure about their ability to maintain compliance with changing regulations and manage risk across all lines of business. And, despite tremendous strides toward automation, 87 percent of respondents are still using manual processes or spreadsheets at least some of the time for their compliance management efforts. 

Considering the uncertainty plaguing today’s lending environment, it has never been more critical for banks to fully embrace digital transformation and harness the ability to ensure loan asset certainty. While providing financial entities the ability to act with agility and claim financial interest in all secured loans, technology solutions must simultaneously align the most rigorous compliance standards and withstand the scrutiny of regulators.

Digital asset certainty minimizes compliance risk in the lending and contracting process by ensuring legal loan ownership. As banks continue to juggle an ever-increasing mass of rules and regulations within the loan process, they need technology to help manage the constantly multiplying barrage of documentation. Even more, if lenders don’t satisfy each and every jurisdictional requirement, they could be liable for examination, regulatory action and fines.

eVault technology reliably establishes the person or entity to whom the single, authoritative copy of the digital loan is assigned, issued or transferred, while providing a secure environment that ensures digital loans remain negotiable and transferable. With this immutable digital record, financial institutions can pledge, sell and securitize digital assets with full compliance and maximum return of investment.

To achieve success in today’s digital finance industry, banks must have assurance that their digital assets are equivalent to their paper counterparts in terms of integrity, enforceability and authenticity ― compliant, transferable financial assets are the cornerstone of liquidity. From providing an auditable, tamper-proof digital chain of custody to demonstrating the legal standing that loans comply with all applicable laws and rules, digital asset certainty minimizes financial risk while maximizing compliant-first market liquidity. Digital asset certainty provides the assurance that all digital loans are compliant and meet all legal requirements and industry best practices, representing the foundation of a trusted transaction.

See where you stand

We’ve crafted a short assessment to help bank leaders gauge compliance and operational risk exposure in current digital loan management practices.

Complete this risk assessment to determine your bank’s readiness in assuring digital loan management practices.

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