By finally telling New York City officials that enough was enough, six banks may have started a trend that will ultimately help bank customers throughout the country.

The banks -- Marine Midland, Morgan Guaranty Trust, Bank Leumi, IBJ Schroder, UMB Bank, and Union Chelsea National Bank -- decided to forgo New York City's business rather than spend the time and money it takes to produce the community reinvestment data that the city requires of bidders.

The banks were willing to provide the city with the material they prepare for Community Reinvestment Act examination. This information would very adequately tell the city about a bank's responsiveness to community needs.

Unfortunately, the city wanted specific answers to its specific questions.

A Tall Order

New York asked for information on the community relations activities of all parts of a parent company's operations, as well as detailed statistics on branches an loans. This kind of information is difficult to put together.

And the money spent to meet the city's requirements could very well exceed any income a bank might earn if -- and the word "if" must be emphasized -- the city deigned to give a bank some of its business.

Holding the Bag

One needn't be a rocket scientist to deduce that spending $10 to possibly earn $9 is not financially prudent. One could also make the case that if a bank decides to pursue this kind of business, someone is going to wind up paying for it.

The likely contenders are:

* Borrowers, who may see loan rates rise as banks seek to recoup costs.

* Other bank customers, who may see fees move up a notch or two.

* Shareholders, who may see the value of their holdings decline as banks continue to be encumbered by the cost of producing data.

* New York City, which may have to pay higher prices because fewer banks will be competing for its business.

Other effects on the city could include increased budgetary outlays for the time and manpower needed to wade through the bank material.

Seems rather silly, doesn't it. Indeed, it's a perfect example of a government entity getting tough on banks to satisfy activists (several of whom are never satisfied with anything that is bank related anyway) and shooting itself and its constituents in the feet in the process.

There are no winners here.

But maybe the action of the six New York banks will put a end to such mischief.

Banks understand that in order to get business from the public sector they must show proof of good corporate citizenship. They just question the need to document corporate citizenship in so many different ways.

There is no need to reinvent the week when it comes to producing information on community performance. That's what Community Reinvestment Act reports are designed to do.

If New York City wants its own reports, what's to stop Boston, Los Angeles, Dallas, Des Moines, and other cities from asking separate reports?

The answer is to have other banks follow the lead of the six New York City institutions.

Maybe if municipal officials hear it often enough, they will get the message and end the reporting overkill.

Other steps banks can take to speed this process along are to let the public know of their reinvestment-act activities.

And banks should also inform the public of the consequences of excessive reporting requirements.

Banks Singled Out

Another point is that securities firms, insurance companies, retailers, finance companies, and other compete with banks, yet are spared the reporting requirements on their community activities.

Banks also must seek allies in their efforts to eliminate reporting overkill.

City officials who won't listen to bank executives might be influenced by the comments of their own employees and of bank customers, the media, and others. Mr. Cole is senior associate at Simms & Associates, a public relations firm in New York. He is a former director of public relations for the New York State Bankers Association.

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