Regulatory Writ to Run

Article excerpt

This year could be the Year of Regulations for community bankers. While the Gramm-Leach-Bliley banking reform law included provisions that significantly reduce the frequency of CRA exams for small banks with satisfactory and outstanding ratings, it will impose new administrative and regulatory burdens on community banks. We will not truly know the extent and severity of these burdens until the regulations are final, banks have implemented them, and examiners have reviewed banks' compliance.

But we need to start thinking about them now. Among other things, the financial reform law imposes new requirements and standards in the area of customer privacy on financial institutions. Unfortunately, the legislation tilts toward the big banks in that it treats sharing of customer information with third parties more restrictively than the sharing of such information with affiliates. The ABA drew its line in the sand on no restrictions in sharing customer information among financial service holding company affiliates.

A key provision of the privacy rules is the "opt-out" requirement, a mandate that all companies offering financial products must give their customers the opportunity to reject the sharing of personal, nonpublic information with certain unrelated third parties.

Also under the new law, all financial institutions are required to have a privacy policy and disclose it to consumers. Proposed financial consumer privacy rules are expected from the agencies early this month. At press time, they had not been released.

I, for one, plan on promoting my privacy policy to my customers to the hilt. I will take every opportunity to make sure my customers know that I treat their private financial information the same way that doctors protect the confidential nature of their patients' records.

All community bankers need to take steps in this direction. They also need to follow the privacy issue closely in their state legislatures, which may now enact even stricter privacy regulations under the federal law. …