WASHINGTON -- Federal Reserve Governor John P. LaWare offered a gloomy assessment Monday of the regulatory climate facing banks, predicting even greater burdens from Washington policymakers.
Heightened focus on hot-button issues -- including band derivatives activities and community reinvestment compliance -- could lead to big new burderns on banks, he said.
'Micromanage by Statute'
"Regulatory compliance is tough now, and it will probably get tougher," Mr. LaWare said in a speech to an American Bankers Association conference. "Congress likes to legislate, and increasingly, banks offer an opportunity for them to micromanage by statute."
Mr. LaWare offered another discouraging prospect for the industry: Several initiatives to ease regulatory burdens face lengthy delays because of a busy congressional calendar. The Fed and the administration have already delayed until 1995 release of a compromise plan to consolidate the banking agencies.
In addition, Mr. LaWare predicted, interstate branching legislation could die this year despite passage of bills by both the House and Senate.
The measure "raises a host of regulatory compliance issues which very welll might delay final action long enough for the bill to die with this Congress in December," hed said. "There are so many technicalities, it may simply be impossible to deal with all of them in conference."
Derivatives Horror Stories
Mr. LaWare told the bankers that, while stories of huge new risks created by growing derivatives activity are overblown, these stories have "stimulated the usual reaction of Congress, which is to want to regulate everything that moves."
"Let's be realistic," he said. "Derivatives are not new. They are not mysterious. And if managed properly, like any risk, they are not particularly dangerous."
Banking regulators are beefing up supervision of big derivatives players, tailoring their oversight to each banking organization. New legislation that imposes reigid rules on market participants could make that more difficult, Mr. LaWare said.
"I only hope that we can persuade Congress not to jump in, at least until there is a better reason to do so," he said.
Mr. LaWare also warned bankers that proposed revisions of the Community Reinvestment Act -- which he called "a system of mandatory credit and resource allocation" -- would impose huge new compliance burdens on the industry.
"A new CRA proposal probably merits another round of public comment, and I hope the agencies will all agree to that," he said. "Better to take a little longer with this project and get it right this time."