Lenders operate amid constant regulatory change. Thomson Reuters reports that major banks receive nearly 200 regulatory updates a day.¹ The European Banking Authority has also acknowledged that the EU regulatory and supervisory framework has grown in both size and complexity, adding to the burden on financial institutions.²
Some regulatory updates require material changes to policies, products, processes, controls, or systems. But regulation is only one source of change: lenders must also respond to portfolio performance, funding costs, and commercial opportunities.
In my discussions with lenders, the quality of decision-making is rarely the constraint. Risk, compliance, product, and executive teams generally understand what needs to change. The difficulty lies in implementing that decision consistently across the entire lending operation.
I call this the decision-to-execution gap: the distance between approving a lending decision and seeing it applied consistently across the operation.
Closing that gap means making controlled change part of the lender’s normal operating model, with the appropriate oversight and safeguards built in.
For example, consider a change to affordability criteria. It may affect the information collected from an applicant; the affordability calculations and the rules used to approve, refer, or decline the application. It may also change approval authorities, exception handling, customer communications, and monitoring.
Inconsistencies emerge when the change is not applied across the lending lifecycle. Origination may adopt the new policy while loan management continues to use the previous one. One product may be updated while another waits for a later release. The unintended result is two operational versions of the same policy.