Academic journal article ABA Banking Journal

Regulation: How Much Does It Cost You?

Academic journal article ABA Banking Journal

Regulation: How Much Does It Cost You?

Article excerpt

HAVE YOU EVER SAT DOWN TO CALculate what regulation is costing your bank? How much, for example, are you paying your compliance people? What does it cost to train them and provide the technology they need to do their jobs?

At Zions it's hard to find employees whose jobs aren't somehow related to government regulation. I spend nearly 20% of my time on compliance-related activities. Some CEOs tell ABA they spend nearly half their time on regulatory issues. And it's not just management. Tellers spend hours filling out currency transaction reports.

Studies by ABA and the Federal Reserve in the 1990s attempted to measure the cost of regulation to our industry. Based on those studies, ABA now estimates that the total cost of compliance today ranges from $34 billion to $42 billion a year. That projection does not include the cost of legislation enacted since the studies were done, including the Patriot Act, Sarbanes-Oxley and the privacy provisions of the Gramm-Leach-Bliley Act. Add to that the cost of rules and guidance from the Securities and Exchange Commission, Financial Accounting Standards Board, and Public Company Accounting Oversight Board.

Community banks often carry a heavy regulatory load in relationship to the resources they have to do the job. ABA estimates that one out of every four dollars of operating expense at the typical small bank goes to pay the costs of government regulation. And I can confirm that the cost of compliance at larger banks is substantial.

What is the impact of this on bank customers and our local economies? ABA testified in Congress this year that if the regulatory burden could be reduced by just 20% and redirected to bank capital, it would support additional bank lending of $69 billion to $84 billion. …

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