How to Prepare for a Regulatory Investigation

Since the financial/banking crisis of the previous decade, regulators have been increasing their attention to a new collection of emerging risks. From ownership of data to the limits of regulation to geopolitical issues affecting the market around the world, regulators are looking to keep everything above board in the banking environment.

This has put a new emphasis on banks to be compliant with the regulatory investigation process. To avoid major issues related to fines and fees, banks can be as prepared as possible with easy steps. Here are some tips on how to prepare for a regulatory investigation in the banking industry.

What to Expect in a Regulatory Investigation

Whenever a bank or other financial institution is asked to be interviewed, whether it’s an internal investigation by an FCA-regulated firm or by regulators themselves, it’s important to be prepared. It’s important to know the purpose of the interview, what the interviewers want to ask and what documents they may refer you to.

It should be anticipated that the interviewers/regulators will have a very structured plan as to what they plan on asking and finding out. Everything will be written down and recorded and official transcripts will be made and become part of the investigation.

Getting Prepped

Before interviews are started there is still time to keep everything–including financial and reputational–protected through bankers professional liability coverage. This piece of insurance is a vital piece of coverage for banks to be protected from any errors and omissions. If the purpose of an interview is related to any E&O’s, this is where bankers professional liability is key.

Next, banks should seek further information from the interviewers to be as prepared as possible. It’s okay to ask and ask again what the purpose is and why you’re being interviewed. Follow up with the regulators and ask if you have the right to be accompanied by a lawyer and, if so, who will pay for legal costs. No matter their answer, it’s still important to seek legal advice and be advised by in-house counsel, if possible.

It’s also important to think over topics and issues the interviewers are more likely to ask about and how you can answer the questions that may and will be asked. Go back through any documents provided in advance of an interview and think about whether any other relevant documents and information that have not been asked of.

The day of the interview, make sure to keep casual remarks limited as everything will be written down and recorded. That being said, it’s important to ask for an official transcript to review on your end and go back over everything for accuracy.

About Financial Guaranty Insurance Brokers

Since 1983, Financial Guaranty Insurance Brokers has distinguished itself as a provider of Professional Liability, Cyber Liability, and Crime insurance products for entities of all types. To receive timely, personalized service from a knowledgeable and experienced staff, call us today at (626) 793-3330 to speak with one of our professionals.