advisory group decided not to sweat the small stuff. The group opted to focus on monstrous banks - and worldwide. Now, just eight years later, Price Waterhouse routinely carries out such grandiose tasks as modernizing the Central Bank of China and making huge staffs work more efficiently. "We don't work with 1,000 community banks across the country," said Robert R. Bench, the head of the regulatory advisory group and its first member. "Others do that, and do it well. We didn't want to. We just made a decision." The approach has clearly paid off. The group's clients include four of the six biggest banks and the two biggest credit unions in the nation, and eight of the 10 largest banks in North America. In addition, the group represents some of the largest banks in France, Switzerland, and England. While some compliance problems are universal among banks, Price Waterhouse has found that large banks in fact face special challenges because of their size and scope. For example, the firm shows its clients how to modernize entire regulatory systems, coordinating staffs of dozens of people. And it helps clear astronomical sums of money from around the globe under the Bank Secrecy Act. But before taking on world problems, Price, one of the nation's Big Six accounting firms, had to establish itself in the regulatory arena. The group traces its origins to a one-man operation that cranked out reports for the firm's internal use. But, Mr. Bench said, higher-ups were so pleased with that service that they started offering it to clients in 1987. Soon after, the boom began. The group now has 30 people, and has expanded into an international operation. All this is happening for a firm that is perhaps known best to the public for protecting the envelopes before the Academy Awards, Emmys, or Grammys. A key to the growth, Mr. Bench said, has been compiling a team with decades of regulatory experience. Indeed, the group includes a number of ex-regulators, including a former chief counsel and former heads of the international and multinational divisions of the Office of the Comptroller of the Currency; a former deputy chief counsel of the Federal Reserve; a former chief counsel of the House Banking Committee; a former head of supervision of the Bank of England; and a former head of the Farm Credit Administration. "We wanted to bring in people who had helped write these regs," Mr. Bench said. "To try and learn all that stuff de novo is impossible. It's enormous." For all its strengths, Price may be taking too narrow a view, some observers say. A source at one competing firm said Price focuses too much on banking, ignoring additional industry interest in mutual funds, securities, and the like. Mr. Bench replies that Price does deal with those issues, including helping banks that want to establish so-called section 20 subsidiaries - divisions that can underwrite and deal securities to a limited degree under the Glass-Steagall law. Should any compliance advisory firm become too specialized, there are plenty of others to pick up the slack. All of Price's accounting brethren are established in the compliance field. Along with Price Waterhouse, the Big Six accounting firms are Arthur Andersen & Co., Coopers & Lybrand, Deloitte & Touche, Ernst & Young, and KPMG Peat Marwick. Andersen has a 40-person risk management service that includes regulatory compliance along with other banking questions. Coopers formalized its 20-person bank compliance service in April 1994 by hiring Alan Schott to head the group. Deloitte has a decade-old, 50-person regulatory advisory practice. Ernst & Young's regulatory consulting group, which started in 1993, has 17 people. KPMG's regulatory practice has grown rapidly in the past months, expanding to include agencies throughout the nation. William Browning, head of Andersen's risk management service, said the six firms keep at least a glancing eye on one another's business. "It's always competitive among the Big Six, but there are lots of smaller, boutique firms we look at too," Mr. Browning said. "The competition is definitely there. We don't just go blindly about our business." He said Price hasn't been as visible or active in the U.S. industry in recent months, due in part to the firm's work in China, and that "other firms have done more than they have lately." Jeanine Catalano, a senior manager with Peat Marwick in San Francisco, said many of the Big Six firms focus on different aspects of compliance. The variety of approaches and specialties, she said, means that companies watch one another, interact on panels and at conferences, but don't directly compete for jobs as much as some may expect. Price's focus on big banks precludes them from some of that competition, but that also can provide an edge in dealing with other tasks. Banks wanting to establish section 20 subsidiaries - a definite big-bank-only concern - have come calling quite often, Mr. Bench said. The Federal Reserve scrutinizes each institution before approving any of these new subsidiaries. Also, Price Waterhouse has received requests from large banks to put their institution's internal control systems under a magnifying glass to ferret out any problems before a federal agency has a chance to do the same. "If done correctly, you allow the government to be the third line of defense in your system," Mr. Bench said. "The first line of defense is directors and management. The second line is a whole bunch of others, including internal auditors, external auditors, controls, etc. If for some reason there's still a break in the plumbing, then yes, banks should look to the government so it doesn't get out of hand." Mr. Bench said that banks have to do a better job of policing themselves, and that some have already started. He said that many more banks are devoting top management positions solely to compliance than in prior years. And in turn Price has devoted more of its own people to compliance, with some of their efforts stepping beyond mere policing to policy writing. Responding to a request for proposal from the Chinese government, Price beat out five firms for the right to assist in building an infrastructure for the Central Bank of China. The bank, once called the People's Bank of China, is in the middle of a sweeping "Westernization," and the group is helping show the way. Mr. Bench said Price is advising the bank on exam procedures and manuals, training programs for examiners, surveillance systems, and any other regulations that they may deem necessary for governing a large banking system. "They don't have entities like the Federal Reserve, Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency there to take care of things," Mr. Bench said. "That causes some chaos." Mr. Bench said the firm has four partners currently in Beijing, and has several teams generating proposals here. The work began in September 1993, and should be finished by next September, allowing the company to move on to its next big task.

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