Academic journal article ABA Banking Journal

Will Bankers Drown in a Sea of Paper?

Academic journal article ABA Banking Journal

Will Bankers Drown in a Sea of Paper?

Article excerpt

Will bankers drown in a sea of paper?

There's a good possibility the ancient Greeks got it backwards. They thought Order was created out of Chaos.

But, as thousands of banks across the U.S. have learned in recent years, order can easily create its own form of chaos--especially when the "order" involves regulation. Paper, paper everywhere. Bankers have been buried in a chaos of forms, reports, and other compliance mechanisms designed to satisfy a growing federal demand for "order." Worse, there is no indication this will end anytime soon.

That's why ABA's board singled out the compliance burden as a priority. ABA formed a regulatory burden task force and commissioned consultant Carter Golembe to look at the history of bank regulation; accumulate data from banker sources; document the regulatory burden on banks; and develop specific recommendations. Golembe's report is expected this fall.

Much staff work has already been done. The study is becoming a sizeable volume itself, a litany of regulations, both big and little, that banks must comply with.

There are basic approvals for such things as adding certain services; opening, moving, or closing a branch; and acquiring another bank or selling one.

There are quarterly call reports, which come with instructions the size of a novel. An average bank's call report runs to about 20 pages itself--some are much larger. The call report forms are often revised, so the routine is never just routine.

Then there are the examination guidelines from the FDIC, Office of the Comptroller of the Currency, and Federal Reserve Board. These state that a bank's actual operations should be compared against written board-approved policies. These policies must cover such things as loan policy, budget, capital, internal controls, codes of ethics, board proceedings, and asset/liability and funds management. There's more. Federal housing concerns bring their own regulatory joys. The Community Reinvestment Act requires that institutions demonstrate that they serve low- and moderate-income groups' credit needs, especially in housing. Each board of directors must adopt a CRA policy, of course. Then there is the Fair Housing Act, to prevent discrimination; the Mortgage Disclosure Act of 1975; the Home Equity Consumer Protection Act; even special rules pertaining to housing loans in flood zones. …

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