Magazine article American Banker

Regulators Praise Progress, Curse Detours on Finmod

Magazine article American Banker

Regulators Praise Progress, Curse Detours on Finmod

Article excerpt

Three high-level bank regulators on Thursday reflected on a year's worth of work implementing the Gramm-Leach-Bliley Act, expressing satisfaction with their accomplishments so far, disappointment that U.S. institutions have not taken full advantage of the new law, and abiding frustration with Congress for handing them a sometimes impossible task.

Federal Reserve Board Governor Laurence H. Meyer, Fed General Counsel J. Virgil Mattingly Jr., and Comptroller of the Currency John D. Hawke Jr. were among the speakers at a conference here, sponsored by the American Law Institute-American Bar Association, on the aftermath of the 1999 financial services reform law.

In the keynote address Mr. Meyer said that regulators have come a long way toward full implementation of the law, but added, "In keeping with the complexity of both the legislation and the issues, much remains to do."

Mr. Meyer spoke candidly about his agency's difficulty in developing capital standards for merchant banking, a power available to institutions that opt to become financial holding companies under the law.

The initial proposal provoked howls of protest from the industry, with bankers claiming that the Fed had grossly overestimated the amount of capital necessary for merchant banking investments. A second proposal, released last month, got a more civil reception.

The development of the capital proposal was "a case study in the benefits of the public comment system," Mr. Meyer said. "Public comments led us to fundamentally review our approach."

But not all elements of the new law resulted in satisfying rulemaking experiences.

A recurrent theme at the conference was that issues only indirectly related to the restructuring of the financial services industry had taken up a tremendous amount of time and effort on the part of the regulators. Chief among them were consumer privacy requirements and the law's "CRA sunshine" provision, which requires extensive reporting of Community Reinvestment Act-related loans or grants by banks to community groups. …

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