A new Federal Reserve Board study finds that compliance costs account for about 13% of the average bank's noninterest expenses.

The paper, by Fed economist Gregory Elliehausen, reviewed 15 studies on regulatory costs completed between 1977 and 1997. He estimates that banks spent $15.7 billion on compliance in 1991, the year when many of the studies were conducted.

"Taken as a whole, the set of regulations imposed on commercial banks appears to be a significant component of noninterest expenses," he wrote.

Industry officials said the study supports their call for deregulation.

"This study reconfirms the need for additional regulatory burden relief for the banking industry," said Karen M. Thomas, director of regulatory affairs at the Independent Bankers Association of America. "These are unnecessary expenses that make banks less efficient and less able to serve their communities."

"This confirms what we have said all along," said Charlotte Bahin, regulatory counsel at America's Community Bankers. "The cost of regulation and compliance is very high. The human costs are quite significant in preparing compliance documents and changing compliance documents as each regulation is changed."

Incremental changes to regulations-such as annual updates to the mortgage disclosure rules-account for nearly half of the compliance burden, the study found. Mr. Elliehausen estimated that in 1991 they made up 6.1% of noninterest expenses, or $7.7 billion.

Most regulations add little in incremental costs to the overall compliance burden, the study found. The exceptions were the mortgage disclosure rules, which were described as "very costly."

Labor accounts for most of the regulatory costs, the study found. Much of that expense is incurred when managers and bank officers spend time learning about new regulations, the Fed said.

Small banks spend proportionally more than large banks on compliance, the Fed found. For every 10% increase in sales, compliance costs rise only 6% to 8%.

Regulatory costs are one of the factors driving the recent wave of mergers, because larger banks spend proportionally less on compliance, he said.

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