Banks spent $11.2 million last year complying with government subpoenas for data on their corporate customers, according to a survey by the American Bankers Association.
"We felt all along that this was costing our banks a lot of money," said John Byrne, senior counsel at the ABA. The results of the survey reinforced that view, he said.
When banks receive court requests from the federal government asking for information on their customers, they search, retrieve, and photocopy the records requested and send them to the government.
If the subpoena covers an individual's records, the government reimburses the bank for the cost of turning over the records.
Practice Called Unfair
But if the request covers corporate records, the bank is not reimbursed, which Mr. Byrne said is "patently unfair."
Both the number of requests for corporate records and the costs of complying with them have steadily increased over the past three years, the survey showed. In 1990. banks received 60,000 requests and spent $2.7 million complying.
In 1991, they received 76,000 such requests, and spent $7.4 million on them. By last year, when they got 90,000 requests for data, they spent the $11.2 million complying, the survey showed.
Rule Change Studied
As the result of a law passed last year, the Department of Justice will use the ABA survey, along with other data collected -- such as what it would cost law enforcement agencies to reimburse banks for corporate records -- to determine whether the reimbursement rules should be changed. A final report on the issue is expected in September from the Justice Department.
All together, 788 banks across the country responded to the ABA survey. The larger the bank, the more likely it was to be asked for data, the survey showed.
On average, each 1992 request cost banks $8,091 to comply with, but the costs varied greatly by region.
The corporate records rule "is just another example of [compliance] costs that are involved that people are not aware of," Mr. Byrne said.
