Banks Are Urged to Lobby Agencies Implementing Law

WASHINGTON -- Now that Congress has passed major banking legislation, all eyes are turning to the next battleground: the agencies that will issue regulations implementing the measure.

The banking act contains dozens of deadlines for new rules that bank and thrift supervisory agencies must meet. (See listing on page 17.)

For bankers and thrift executives, the process offers one last chance to influence how the changes take shape. Even though Congress wrote the 400-page bill, the agencies still have some leeway in drafting the regulations that will the implement it.

Some observers are urging banks to lobby their regulators early -- before they finish the first draft of the new rules.

Bankers in the past typically didn't join the fight until the regulations were put out for comment, said Karen Shaw, president of the Institute for Strategy Development. "By then, the scope of the regulation is pretty much set in stone and it's hard to change," she said.

Tall Orders

For regulators, the legislation's deadlines may prove next to impossible to meet. For example, the agencies that regulate banks and thrifts are given 18 months to implement a risk-based capital standard that includes interest rate risk.

"The only agency that's managed to do that so far is the Office of Thrift Supervision, and the industry pretty much blew that away," said Diane Casey, executive director of the Independent Bankers Association of America. The OTS withdrew its regulation this fall under industry pressure.

Moreover, Ms. Casey said, the last time the agencies grappled with risk-based capital standards it took years to come to agreement.

For those charged with interpreting the new law, the process is more difficult than usual, in no small part because of the haste with which it was thrown together during the final night of the congressional session.

|A Bunch of Tired Guys'

"The frustrating thing," said one financial institutions lobbyist who sat through the all-night session, "is that you spend long months agonizing over every little detail and then the whole bill comes down to a bunch of tired guys who just want to go home."

Because the bill was pieced together in the final hours of the session, it apparently will not be accompanied by the report that is usually appended to a bill to explain its intent.

"It means that if they want to figure out what was done, they'll have to research the floor debate, which isn't always that illuminating," said Ms. Shaw. "The report is usually pretty helpful."

So far, the supervisory agencies are just trying to get a handle on what they have to do. The Office of the Comptroller of the Currency, for example, designated Raija Bettauer, director of legislative and regulatory analysis, to coordinate the initial work.

"Please don't call her," begged OCC spokeswoman Lee Cross. "She's really swamped."

More Stress for Bankers

While the bill, which President Bush is expected to sign shortly, is sure to present difficulties for the agencies charged with implementing it, bankers are likely to feel even more strain as they cope with the changes mandated in the bill.

"It's more a problem for the industry to absorb all these things," said Edward L. Yingling, chief lobbyist for the American Bankers Association.

In particular, he said, "it's obviously a problem for the larger community banks because they just don't have the staff to do it."

Some provisions will require fundamental changes in the way banks run themselves. One, for example, says each bank must establish an audit committee composed entirely of outside directors. But "some banks have no outside directors, period," said Mr. Yingling.

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