WASHINGTON - The banking industry spent more than $3 billion last year complying with regulations, according to preliminary estimates in an American Bankers Association survey.

Banks spent nearly $3 billion - equal to nearly 16% of total industry profits - just on the salaries and benefits of employees dedicated to regulatory compliance, the survey found.

In addition, a "substantial" amount was spent on computer software, consultants, and other factors, according to an ABA spokewoman.

Costs Still Being Calculated

The association, which based its findings on a survey of 10,000 banks, is still calculating the total cost of compliance, which will be reported this month.

Banks, particularly smaller ones, have increasingly complained that they are being strangled by red tape, and they plan to use the findings at a regulatory hearing to bolster their argument. A $3 billion price tag would have equaled 16% of the $18.6 billion in profits posted by the industry last year.

The ABA calculates that banks spend 85 million hours annually on compliance, including the selection and preparation of data.

Data on compliance costs are also compiled by the the White House's Office of Management and Budget, which is required by the Paperwork Reduction Act of 1980 to keep of the time the public spends on government paperwork.

Regulators Use Estimates

The agency collects banking data from the federal banking regulators, who made estimates by asking examiners and bankers how long it should take to complete the forms, write the reports, or file the applications required by regulations.

According to the most recent OMB report, the Federal Deposit Insurance Corp. requires state banks to complete 4.5 million filings every year, while national banks must complete 7 million filings for the Office of the Comptroller of the Currency.

The Federal Reserve Board, which regulates state banks that belong to the Fed system and bank holding companies, says it requires 180 million filings annually.

A Fed official said her agency's total dwarfs those of the FDIC and OCC because the Fed counts every piece of paper a bank must send out - including an estimated 84 million monthly statement-suffers a year mailed to depositors.

Rogues' Gallery of Rules

Which rules are the most paper-intensive? According to the OMB they are: * Regulation Z - the guidelines for consumer disclosures - which take banks 7.5 million hours a year. * Regulation E - electronic fund transfer rules - which require 2.9 million hours a year. * And quarterly call reports, which consume 1.5 million hours a year.

Often, the agencies disagree among each other on the actual time needed to comply with a particular regulation, which calls their estimates into question, according to OMB examiner Gary Waxman.

Take the CRA, Please

Take the controversial Community Reinvestment Act, which banks continually point to as one of the most time-consuming rules on the books.

The Comptroller of the Currency estimates that a bank can complete all of its CRA paperwork in just one hour. The Federal Deposit Insurance Corp.'s estimate is two hours.

But regulators from OCC and FDIC admitted in interviews that their CRA estimates are low and will soon be increased - but maybe just to eight hours.

Bankers may find this absurd. But an agency official, who asked that his name not be used or his agency identified, said CRA only requires a bank to post a lobby notice, maintain a public comment file, and prepare and update a statement defining its local market and the types of credit it is prepared to extend there.

Everything else a bank does to comply with CRA is optional, in the eyes of the paperwork estimators.

While banks are "encouraged" to include in their CRA statements descriptions of their programs to reach minority borrowers, that type of information is not "required," he said.

Some other points of contention:

* The FDIC says it takes a bank 21 hours to set appraisal standard; the OCC says 59 hours.

* Call reports, by FDIC's estimate, take an average of 23 hours to complete; the OCC calculates 35 hours.

Banking executives say they are fed up with the time and money they must spend on regulatory compliance.

Banker's $500,000 Headache

"The new rules and regulations that the examiners say we must do at once, will cost this institution over $500,000 over the next two years, "J. Knox McConnell, president of First National Bank of Keystone, W.Va., estimated in letter to American Banker. First National a $91 million-asset bank, made about $2.7 million last year.

The fury has spawned a movement.

The Colorado Bankers Association is spearheading a regulatory cutback campaign it hopes to spread across the country. It is called: "Government's Strangling Banking."

"A single copy of every federal law and regulation, in small print on thin paper, is 41 inches of paper, printed both sides," CBA president Don Childears said "That is an amazing stack."

While Congress hates banks, it loves small business, he said. So, CBA is asking small businesses to help explain to lawmakers that more regulation results in less credit.

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