State-chartered banks in Washington state are breathing a little easier since the legislature passed a regulatory reform bill in March.

The legislation, developed with input from banks and other institutions, eliminates what bankers saw as various burdens in laws governing the sate's financial institutions.

Drafted by the state's Department of Financial Institutions, the measure makes Washington one of the only states to legislate such specific reform efforts.

The goal of th bill was to stop micormanaging well-run institutions, said John L. Bley, director of the Department of Financial Institutions. "That's what this bill does It minimizes our intrusions."

Since the department was created last October -- when the state merged several regulatory divisions -- it has been on a fast track to examine the state code to "make the statutes smarter and more easy to work with," he said, but not to compromise laws addressing public interest.

Washington's targeted legislative effort is unique, said Ellen C. Lamb, assistant vice president of the Conference of State Bank Supervisors, because most other states have addressed regulatory burden in less formal ways.

Bankers Grateful

The result is a regulatory break for state banks -- and community bankers appreciate the respite.

"Anything that helps us on regulatory burden has got to benefit a bank," said Michael Clementz, president and chief executive of $110 million-asset North Sound Bank, Poulsbo.

"Our director, John Bley, has worked very well with our community banks to update our laws as times change."

Pat Fahey, chairman, president and chief executive of $120 million-asset Pacific Northwest Bank, Seattle, agrees. "The state bill did clean up a number of antiquated things."

Call-Report Ads

However, Gov. Mike Lowry, a Democrat, vetoed one section that would have scrapped language requiring banks to publish quarterly call reports in local newspapers, a "time-consuming, constly" process, Mr. Fahey said.

Mr. Bley said his staff will continue to examine that issue. He also emphasized that the road to the revisions was significant in itself.

"What is important about the bill is not so much its substance -- although that's significant -- [but] the process," he said.

200 Institutions Queried

The department -- which regulates several types of institutions, including commercial banks, thrifts, and credit unions -- sent questionnaires to 200 institutions and worked with attorneys representing various entities to draft the bill, which will become effective in mid-June.

The bill stresses the accountability of directors and managers for the operations of their institutions However, it has eliminated most of inconsistencies, ambiguities, and unnecessary paperwork pointed out by the interested parties, Mr. Bley said.

Having eased the regulatory burden on well-run institutions, the next step is to formalize the enforcement process for troubled ones, Mr. Bley added, pointing out that his department plans to present a bill next year to establish a system to scrutinize troubled institutions more effectively.

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