Magazine article American Banker

Bankers Argue Compliance with CRA Takes Far Longer Than Agencies Estimate

Magazine article American Banker

Bankers Argue Compliance with CRA Takes Far Longer Than Agencies Estimate

Article excerpt


Giving Sen. Phil Gramm more ammunition in his campaign to curb the Community Reinvestment Act, bankers are blasting their regulators for underestimating the time it takes to comply with the 1977 law.

According to the four federal banking agencies, the industry devotes 1.25 million hours a year to collecting data on loans covered by the controversial law, which is playing a pivotal role in the debate over financial reform legislation.

Though regulators have increased their compliance-time estimates by 500% in the last year, the estimates are still far too low, according to Paul A. Smith, senior federal administrative counsel of the American Bankers Association.

Bankers are buried'' by new demands for documentation of community development loans, investments, and service, Mr. Smith said.

Sen. Gramm agrees, and also plans to weigh in.

The Senate Banking Committee chairman has his staff analyzing the agencies' estimates, which range from 10 hours a year for small banks to 635 hours for large ones. Regulators have a fatal lack of data on what it takes to comply,'' a Senate Banking Committee spokeswoman said Thursday.

In their request for comments on the estimates, the regulators conceded that the number of institutions consulted was too small to enable the agencies to make useful projections regarding CRA burden industry wide.''

A federal law designed to cut red tape requires agencies to get permission every three years to collect data from the private sector. Agencies must estimate compliance times and put the request out for public comment. The banking agencies -- the Federal Reserve Board, Federal Deposit Insurance Corp., Office of the Comptroller of Currency, and Office of Thrift Supervision -- first attempted to renew the CRA data- collection request last year. But criticism forced them to increase the estimate in May. …

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