Unintended Unsafe Conditions One of the most pressing concerns is that fewer regulatory staff could lead to longer gaps between examinations — critical moments for identifying risks, ensuring regulatory compliance and maintaining financial stability. Consequences of reduced oversight include: 1. Delayed Detection of Issues: Problems may go undetected longer, making them harder and more expensive to fix. 2. Increased Risk Exposure: Institutions may take greater risks when they believe scrutiny is less frequent. 3. Erosion of Regulatory Compliance: Less frequent exams can lead to diminished focus on compliance, as short-term priorities crowd out long-term risk mitigation. Impact on Information Technology Spending The downsizing of regulatory staff doesn’t just affect compliance — it may influence how board members allocate resources, particularly in information technology (IT) and information security (IS). Several factors contribute to this potential shift in spending priorities: 1. Perceived Reduced Need for Compliance: Fewer exams might lead boards to deprioritize technologies that support compliance. 2. Short-Sighted Cost-Cutting: Institutions may delay or reduce IT and IS investments to save money — a move that can weaken their cybersecurity posture. 3. Shift in Strategic Focus: Funds may be reallocated to other initiatives, potentially neglecting essential tech and security infrastructure. Essential Oversight: Why Audits Matter More Than Ever With reduced regulatory presence, external IT and IS audits become essential tools for financial institutions committed to maintaining high standards of security and compliance. 15 NEBRASKA BANKER
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