It’s not unusual for me to hear lawmakers and bankers complain about the additional regulations placed on lenders since the financial crisis.
On Tuesday, I spoke with someone whose Charlotte company stands to gain from increasing bank regulations.
Private equity firm Falfurrias Capital Partners announced on Tuesday that it has bought a controlling interest in RegEd, a Wake County-based company that helps the financial services industry comply with regulations.
In an interview after the deal was announced, Marc Oken, managing partner for Falfurrias, told me his firm sees business opportunities in banking compliance, an area he said “has grown by leaps and bounds.”
“There’s heavy compliance requirements, and that’s what these guys (RegEd) do for a living,” Oken said. “They’ve had attractive, steady growth over the last five years.”
Regulations are nothing new for banks. But since the financial crisis, banks have had to comply with additional regulations, such as those requiring “living wills” and those requiring mortgage lenders to ensure that borrowers can repay home loans.
The financial sector expects additional regulations: Many of the rules from the 2010 Dodd-Frank financial reform law have yet to be finalized.
According to its website, Falfurrias invests in a range of businesses, including those in the retail, manufacturing, energy and health care industries.
One of its investments was Charlotte fried-chicken chain Bojangles’, which it bought it 2007 and sold in 2011. Oken said Tuesday that Falfurrias typically hangs on to its investments for four to five years.
Oken said RegEd marks the first time Falfurrias has bought an interest in a company that helps financial services firms comply with regulations.
It’s not surprising that Falfurrias has invested in a company that serves the banking sector, given that Falfurrias was founded by two former Bank of America executives. (Oken is a former chief financial officer for the Charlotte-based bank. Falfurrias’ other co-founder, Hugh McColl Jr., is a former CEO of the bank.)
Oken said his company’s plans for RegEd include making it a bigger player internationally and winning more business from existing bank customers.
RegEd’s current customers are based all over the U.S., he said, including some “large banks” in the Charlotte area. According to Falfurrias, RegEd employs about 200 people. It was founded in 1994.
In Charlotte and elsewhere, some banks have boosted their risk and compliance staff since the financial crisis as they seek to comply with regulations.
Oken said banks are now interested in outsourcing compliance functions as they try to cut overall costs and improve their profit margins. He expects demand for RegEd’s services to remain strong as regulators roll out more regulations.
“We don’t see the level of compliance dissipating at any time soon,” he said.