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IBAA/GRANT THORNTON STUDY PROVES OVERWHELMING COST OF REGULATORY BURDEN

 WASHINGTON, Jan. 26 /PRNewswire/ -- The Independent Bankers Association of America issued the following:
 Community banks are facing a crushing regulatory burden. Over- regulation and over-documentation are adversely impacting small- business lending in particular, hampering the most dynamic, job- creating sector of our economy.
 Responding to Federal Reserve Board Chairman Alan Greenspan's challenge to present "unassailable documentation" of the regulatory burden, the Independent Bankers Association of America (IBAA) retained the respected firm of Grant Thornton to conduct a three-phase study.
 The evidence is in. Even before implementation of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA), the cost of complying with existing regulations, both in time and money, is overwhelming -- a drag on the banking industry and its customers.
 In the IBAA's judgment, the study provides the factual underpinning to justify prompt action by President Clinton and hopefully Congress.
 According to the study, titled "Regulatory Burden: The Cost to Community Banks," the annual cost for community banks to comply with just 13 pre-FDICIA regulatory areas is $3.2 billion. That means community banks spend a whopping 24 percent of their net income before taxes on complying with just a fraction of the rules that govern the industry.
 In terms of time, the survey shows that community banks spend 48 million hours annually complying with only 13 regulatory areas. Translated to full-time equivalent employees, about 22,800 staffers must dedicate their time to compliance matters.
 "There is a gradual understanding among people, including regulators and lawmakers, that the crushing regulatory burden facing community banks is counterproductive," said IBAA President Bob Hawkins, chairman of Southern Commercial Bank in St. Louis. "It ties up resources that could be applied to lending funds to small businesses, which are responsible for creating the vast majority of new jobs in our country."
 The six-month survey is the first to focus solely on the compliance costs of the nation's 9,700 community banks, defined by IBAA as locally owned and operated institutions. However, if the compliance cost is extrapolated to cover all commercial banks in the United States, the cost would be approximately $11 billion for the 13 selected regulatory areas.
 The study substantiates the report by the Federal Financial Institutions Examinations Council (FFIEC), issued last year, which concluded that the compliance cost for all banks in all regulatory areas may be as high as $17.5 billion. Extrapolating the IBAA/Grant Thornton data to cover all commercial banks, it is clear that the FFIEC estimate is low.
 The study gives definitive evidence that the regulatory burden is especially hard on small banks. Banks with assets under $30 million incur three to four times the compliance cost of larger banks.
 According to IBAA statistics, the average community bank has $42 million in assets and about 20 full-time employees. The study indicates that such a bank faces annual compliance costs of $178,000. In terms of time, the cost is 3,137 hours, or 1.5 full-time employees (7.5 percent of the bank's work force).
 However, the study indicates that small banks can benefit from exemptions. The Home Mortgage Disclosure Act proved to be the least costly regulatory area -- $17.5 million and almost 421,000 hours annually -- largely because smaller banks are exempt from Regulation C.
 The study proceeded in three phases. In Phase I, Grant Thornton used written questionnaires to determine which regulatory areas community bankers deemed most onerous. In Phase II, Grant Thornton conducted field cost studies at nine representative community banks. In Phase III, results of the field cost studies were used to develop separate surveys covering each of the 13 regulatory areas identified in Phase I. These surveys were then sent to 2,600 community banks.
 IBAA is the only national trade association which exclusively represents the interests of the nation's community banks.
 -0- 1/26/93
 /CONTACT: Diane Casey or Viveca Ware of the Independent Bankers Association of America, 202-659-8111/


CO: Independent Bankers Association of America ST: District of Columbia IN: FIN SU:

TW -- DC011 -- 9062 01/26/93 12:09 EST
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Date:Jan 26, 1993
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