How Not to Influence Regulators
Lobbying is an integral part of the lawmaking and regulatory process. Lobbying, together with filing comments, is how points of view are expressed and realities can be understood. Successful lobbying can make all the difference in whether the resulting requirements are workable or punitive.
To get results - both this time and in the future - the lobbyists and the rule makers must respect each other. The lobbyists' information must be pertinent and accurate or the lobbyists will not be credible. And lobbyists should never intentionally mislead the lawmakers and rulemakers.
With these general principles in mind, the audience of more than 1,000 compliance practitioners (including more than 100 examiners and other regulators) at ABA's National Regulatory Compliance Conference, expected valuable insights into the forces behind current legal developments and some predictions about what would be coming. The speaker, Wayne Abernathy was one of ABA's leading lobbyists. Unfortunately, the luncheon speech at the ABA conference was a lesson in how not to lobby.
Step one was to misunderstand the nature of regulatory risk. Abernathy defined regulatory risk, not in the context of laws, regulations and bank practices, but by placing blame on personal and professional shortcomings of those who regulate. In fact, he assumed that regulatory risk managers exist, not to manage their institutions' exposure to legal violations and reputation risk, but to protect their institutions from irrational regulators.
This is not how to gain sympathy for the efforts required to comply. It is also not how to gain trust and build a working relationship. It is instead how to build animosities and distrust. If a lobbyist so misunderstands the nature of regulatory risk as to blame it on the personalities and skills or lack of skills of those who regulate, that lobbyist cannot effectively influence the very people he or she sees as the cause of the problem.
Consider how Abernathy listed the sources of regulatory risk. Source number one was the "dumb or incompetent or uninformed regulator". This did not sit well with the 100+ regulators in the audience nor with many of the compliance managers who work with them. The next risk source, "failure to supervise staff," didn't go down well either, especially as most of the regulators in the room had supervisory responsibilities. It went on from there, culminating with allegations of corruption among regulators.
Not once did the speech focus on the real sources of risk, such as banking practices that take unfair advantage of customers and lead to onerous, overkill laws and regulations, or consumer lobbyists seeking unrealistic services or information from financial institutions. And if you don't think that industry practices result in regulatory burden, just look at the most recent changes to Regulation DD.
Many of the regulators sitting in the audience work hard to maintain high skill levels and to help financial institutions with compliance. They participate in ABA's schools and conferences both as planners and as speakers. They attend the conference so that they can learn from the sessions and from the conference's many opportunities to share ideas and solutions with the industry. They did not deserve the blame that Abernathy placed on them.
Sure, there have been occasions when an examiner or a policy maker has been unfair, excessively rigid and even off-the-wall. There are occasional examiners-from-H___. But the vast majority are hard-working, informed, and simply doing the job that keeps financial institutions open, compliant and solvent. And here's the bottom line: If your examiner was at this conference, would you want to be the next institution he or she examines?
Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 9, 8/05
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