Banks spent more than $337 million in the early 1990s for initial compliance with the Truth-in-Savings Act, a Federal Reserve Board study found.

Banks incurred 38% of their start-up compliance costs when they changed their data processing systems to accommodate uniform disclosure requirements on interest rates and fees.

In-house legal expenses accounted for 18% of the costs, training for tellers and customer service personnel 14%, and redesign and printing of disclosure forms 13%.

Total start-up costs averaged $29,390 per institution. This translates into $2.66 per account, or 41 cents for each $1,000 in consumer deposits.

The law was passed in 1991. Industry totals were extrapolated from a 1992-93 Fed survey of 887 banks, but the report was prepared only recently to address the Fed's growing interest in the costs imposed by new regulations, said staff economist Gregory Elliehausen.

Banks tried to pass the extra costs on to consumers: Thirty-five percent raised fees on checking and passbook savings accounts, and 27% lowered interest rates on deposits, the 1992-93 survey found. Also, one-third of the banks planned to reduce the variety of accounts offered. On the chopping block: interest-bearing checking and some certificates of deposit.

"The cumulative effect is that many regulations end up costing the consumer," said Jo Ann Barefoot, a partner at the consulting firm KPMG Barefoot Marrinan.

Small banks were hit hardest. Institutions with less than $100 million of assets spent $3.19 per account preparing for Truth-in-Savings compliance, compared with $1.23 by banks with assets greater than $500 million. "This is just another indication of how much more of a burden regulations impose on small banks," said Karen Thomas, regulatory counsel for the Independent Bankers Association of America. For instance, she said it costs small banks more per account to print brochures and revise forms when rates change.

Multibank holding companies were most effective at keeping compliance costs in check, the study found. Holding companies composed of small banks incurred an average cost of $1.31 per account, 68% less than small independent banks. Medium-size banks affiliated with holding companies spent $1 for each account, 48% less than independent institutions of comparable size.

While Truth-in-Savings is not considered one of the most burdensome regulations banks face, the study shows that new rules carry big start-up costs, said Mr. Elliehausen, an author of the report.

"Like many banking laws, Truth-in-Savings has a lot of disclosure requirements," he said. "It's quite likely what we find here would apply to other changes in regulation."

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