WASHINGTON -- Julie L. Williams sees herself as a regulatory surgeon.

Ms. Williams, deputy chief counsel at the Office of the Comptroller of the Currency, was recruited a year ago to do a top-to-bottom review of national bank rules.

The goal: eliminate unnecessary rules, reduce the cost of compliance, and clarify the meaning of rules.

"What we're doing here is surgery," she said. "I'm not going to use a machete. I have to be careful."

More than Just Cutting

Ms. Williams said that, though it's easy to cut, it's not so simple to make rules better. She wants to avoid just making the regs shorter, and wants the revamped version of each rule to make more sense.

The industry's claims that banks are hampered by too many rules and too much paperwork are true, Ms. Williams acknowledged in an interview last week. The OCC estimates that the cost of compliance with regulations accounts for 14% of banks' expenses.

This cost has given a competitive edge to rivals of banks, she said. Over the last 20 years, banks and other insured institutions have seen their share of the nation's loan assets drop by 26% to just 36%, she said.

Sense of Determination

Ms. Williams comes across as determined, as someone who knows what she wants and who enjoys figuring out how to get it.

"She's competent, thorough, and careful," said Jim McLaughlin, director of agency relations at the American Bankers Association. "And she's very willing to listen to and address all of the concerns we raise."

Comptroller of the Currency Eugene A. Ludwig, who lured Ms. Williams away from the Office of Thrift Supervision, said: "Julie is a superb lawyer and fine person. Her extensive experience in the area of federal regulation makes her ideally suited to lead our regulatory burden reduction effort."

Faced with this task, Ms. Williams first sat down with six senior agency lawyers to study a list of OCC regulations.

Model Regulation

The group was looking for one rule to start with, to become a model for the overhaul process. The group wanted a regulation that was not too long but was outdated or hard to follow. That last criterion was not too difficult.

Ms. Williams said she finds parts of rules she can't believe still exist, because the language is so outdated.

The lawyers have found at least one thing they don't understand in every rule they've looked at, according to Ms. Williams.

The winner: rules limiting how much a bank can lend to one borrower.

The lawyers discussed every aspect of making the loans-to-one-borrower rule better. A first draft of revisions was presented to a steering committee headed by Susan F. Krause, senior deputy comptroller for bank supervision policy.

Common Sense Applied

"Julie has done a terrific job taking an objective look at our regulations and applying some common sense to them," said Ms. Krause. "She has a quiet manner but people really listen to her."

The committee made some changes, and then the draft went to Mr. Ludwig. He made suggestions for improvements and the rule was put into final draft.

The changes narrow lending limits to situations where excessive loans to a borrower present safety and soundness concerns. The revisions simplified the calculation of the lending limits, restructured loan combination rules, and addressed specific questions that bankers had asked about the rule, she said.

"If they tell us what drives them crazy, it gives us an idea of what to work on," Ms. Williams said.

In the Wings

The lending limit changes were proposed Feb. 11 and should be finalized soon.

Next up: quicker approvals for branch applications, corporate reorganizations, and office relocations for banks that are healthy and well managed.

Regulations governing investment securities also are being rewritten. Ms. Williams said the the proposal will reorganize the rule by placing related subjects together and will address recent market developments and judicial decisions.

The OCC's rules for international operations of national banks will be streamlined to reduce compliance, Ms. Williams said.

"We have a number of projects in different stages," she said. "The tasks is to make sure everything keeps moving."

Interagency Rules

Although the review process is focused on OCC regulations, Ms. Williams is doing some work on interagency rules as well.

One such project is reform of the management interlocks rules. The Federal Deposit Insurance Corp. and Federal Reserve Board have already proposed exempting banks that together hold less than 20% of a market's deposits.

"It makes sense for all the agencies to have the same regulations," she said.

Another big challenge, Ms. Williams said, is to keep the wording clear. She said the industry is not always going to end up with a shorter rule, because sometimes more explanation is better.

Ms. Williams said she asks OCC lawyers who do not write regulations to look over her work. "I tell them: Read this and tell me if you understand," she said.

Taking a ground-up approach to regulations is forcing the agency to analyze why it asks banks to do what it does, Ms. Willams said. In other words, she said, it's a fresh perspective for an industry that needs it.

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