ORLANDO --
Comptroller of the Currency John D. Hawke, Jr. said today that consumers are
ill-served by the current system of compliance regulation and called for an
independent, professional, well-funded research effort to see if a new
approach could be found that would be more effective for consumers and less
burdensome for banks.
Unreadable,
unfathomable, and costly disclosures may be no better -- and theyre possibly
worse -- than no disclosures at all. Unfortunately many of the disclosures that
fill our mailboxes and settlement packages fall into the unreadable and
unfathomable category, Mr. Hawke said.
I believe we can
do better in serving the interests of consumers, and do it more simply and at
less of a cost burden, he added in a speech to the annual convention of the
Independent Community Bankers of America.
Mr. Hawke suggested
that the U.S. Food and Drug Administration (FDA) had provided a model for
consumer disclosure with nutritional information labeling requirements. The
FDAs four-year study involved all interested parties -- industry, public
health experts, consumer groups, and regulators -- and resulted in a system of
uniform labeling that is readable and reliable.
Finally consumers
had -- in simple, readable form -- the right kind of reliable, relevant, and
consistent information about what they were buying and consuming, Mr. Hawke
said. And they had it at a critical
time -- before they made a purchase.
The Comptroller
said all U.S. regulators could learn from the FDA experience.
We have to start
by talking to the people for whom the disclosures are designed to learn more
about their needs and how those needs are best met, Mr. Hawke said. We have
to do more research, more testing, more consulting with end users, and more
validating to ensure that our disclosures produce positive results and not
simply more waste and frustration.
Mr. Hawke said
privacy disclosures, for example, could be improved with a layered approach
under which
consumers would receive a short-form with a few basic facts presented in large,
boldface type.
This disclosure
would provide the basic informationsuch as the fact that the institution
shares the consumers information with third parties for marketing purposes,
and that the consumer has the right to block such sharing arrangements, Mr.
Hawke stated. But it would also advise
consumers about where to turnwith a phone number or a website address, for
exampleto obtain a more detailed disclosure with all of the information
required by the Gramm-Leach-Bliley Act.
In his speech, the
Comptroller told community bankers that while bank regulation is an
unavoidable necessity, consumer disclosures should be viewed not as a burden,
but as a competitive opportunity.
Mr. Hawke
acknowledged that bankers may find that the laws and regulations that govern
their industry are burdensome and costly, and said the sharpest increase in
regulatory burden has occurred in the in the area of consumer-oriented
legislation, with more than two dozen such laws passed since 1968.
In 1991, according
to one study, those costs may have exceeded 12 percent of bank noninterest
expenses, Mr. Hawke said. Compliance regulation is particularly onerous for community
banks, which dont enjoy the economies of scale that are available to larger
banks.
The Comptroller
said these laws -- and the burdens theyve created -- were not enacted in a
vacuum, but were passed in response to abuses in the financial marketplace that
the banking industry had proved unable or unwilling to correct on its own.
It is a simple fact of political life that
legislators will respond to the conduct of the worst actors, and will generally
do so with laws that affect the business of all, including the best, Mr. Hawke
said.
The Comptroller
said that community banks make up an enormously important part of the national
banking system and voiced his personal support for community banks.
Of the 2,100 banks
we supervise, close to 2,000, or 92 percent, are under $1 billion in assets,
Mr. Hawke said. I personally believe
that the nations community banks are an essential foundation of our financial
system, and I want to see community banks flourish and prosper.
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The OCC charters, regulates and examines
approximately 2,100 national banks and 52 federal branches of foreign banks
in the U.S., accounting for more than 55 percent of the nations banking
assets. Its mission is to ensure a safe and sound and competitive national
banking system that supports the citizens, communities and economy of the
United States.
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