Regulatory Burden: How Much Really?
We've all heard the griping about regulatory burden. We've even griped ourselves. We figure that no other industry has to deal with the amount of regulatory burden that financial institutions face. Each time a new law or requirement rolls out, we moan that it's more than a good banker can stand. But somehow we manage to cope with it.
And there is plenty of evidence that regulatory burden is overwhelming. For starters, there is Truth in Lending. That alone is enough to daunt the bravest and most determined. Add in a few things like HMDA and BSA and there is plenty to make the case for regulatory burden.
But before claiming the title of Industry Most Burdened by Regulation, let's take another look. Without question, regulation carries many costs. Any requirement is a cost and a burden. But when was the last time we looked at the regulatory burden in context?
A typical mortgage file can be more than an inch thick. An entire ream of paper is consumed by a single loan. Is this proof of regulatory burden? Put it to the test. Pull out a loan file and look at the documents in the file. Now separate the compliance documents from the "real" documents and make two piles. Which pile is higher?
Surprise! The compliance pile really has only a few sheets of paper while the "real" pile is most of the file. Granted, some of the compliance papers are doozies. Truth in Lending disclosures and HUD-1s are not easy to produce. But neither is a deed, or an ARM rider. Work for work, the documents may be about even. Pile for pile, the compliance pile is much smaller.
Now take a look at deposit documentation. Of course the disclosures are lengthy - much longer and more detailed than the old signature cards. But they are at least pre-printed. And when you take the disclosures apart from the deposit contract, you may be surprised to see how much is really the contract. Some of the extensive material is really a deposit contract that is a good thing to have in place. It isn't all disclosures.
What does this say about regulatory burden? We aren't about to argue that regulatory burden isn't really burdensome. Nor are we about to argue that what we properly call regulatory burden doesn't amount to much. But, when compared to what most bankers would call the real work, are we perhaps blaming too much on regulatory burden and not acknowledging how burdensome the real work is - all by itself?
To a great extent, consumer protection has become the whipping post for the fact that work itself has become more complicated and more demanding. But work (lending, taking deposits, making investments and the like) is what financial institutions are all about. No-one would consider complaining about the work generated by safety and soundness concerns. After all, without good loans, banks and other creditors wouldn't be in business. Without well-written deposit agreements, financial institutions would be at great risk.
But no-one says we can't gripe about consumer protection. So we gripe about consumer protection under the catch-all of regulatory burden while leaving a real source of the burden - work - untouched.
We are not about to argue that regulatory burden is a good thing - although consumer protection clearly is. But we think that it's about time that we put the blame where it actually belongs. Only some of the blame for regulatory burden belongs on compliance.
By blaming consumer protection and related laws for the sum total of regulatory burden, we give consumer protection a bad name that it doesn't really deserve. By giving consumer protection a bad name, we take attention away from the positives involved. When we complain, we fail to see what we can do that is productive for the business - such as providing excellent, fair service to all customers.
Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 12, 11/04
Privacy Policy Disclaimer Recommend This Site ! Contact Us
BankersOnline is a free service made possible by the generous support of our advertisers and sponsors. Advertisers and sponsors are not responsible for site content. Please help us keep BankersOnline FREE to all banking professionals. Support our advertisers and sponsors by clicking through to learn more about their products and services.
|
|
Print Friendly!
Email This Article!
Discuss NOW!