Capital Briefs: Banks Overcomplicating Compliance, GAO Says

Banks may be overcomplying with consumer protection laws, according to a recent General Accounting Office report.

The study examined the impact and burden of federal regulations on the business community. Three banks were among the 15 companies surveyed; none allowed its name to be used.

The GAO found that poor communication results in a misunderstanding of regulations. The agency referred the bankers' complaints to regulators for a response.

For example, one bank claimed that it was at a competitive disadvantage because it had to disclose in advertisements the risks associated with certain investment products. But the Federal Deposit Insurance Corp. told the GAO there is no rule requiring such disclosure for the advertising of nondeposit products.

One banker said he had to create 15 new forms to comply with Regulation DD, which requires all fees charged to an account to be described separately on a statement. The bank said it spent $3.8 million reprogramming its computers to produce savings yield information.

The Federal Reserve Board responded that, while banks are required to disclose the yield earned and fees imposed, nothing requires that bank employees complete forms.

Another bank said reporting transactions of more than $10,000 under the Bank Secrecy Act is time-consuming, of little value to law enforcement officials, and worthless to banks. But the Treasury Department claimed the data are useful because they create a paper trail that allows investigators to track suspected criminals.

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