On April 22, 2004, Tennessee bankers met in Nashville to discuss the impact of regulations on the financial sector. John M. Reich, Vice Chairman of the FDIC, opened the meeting by urging the audience to share their comments and suggestions during the meeting, with members of Congress, and via the EGRPRA comment process.

Financial Institutions Commissioner Greets Bankers

Kevin P. Lavender, Commissioner, Tennessee Department of Financial Institutions, welcomed the audience to Nashville.

Keynote Address

William Fox, Director, Financial Crimes Enforcement Network (FinCEN) opened his remarks by complimenting the banking industry for the manner in which it has responded to the numerous anti-money laundering and terrorist financing demands placed on it in a post 9/11 world. Mr. Fox discussed his family’s background in the community banking business and committed that FinCEN will explore every option to address banker’s concerns with respect to enhancing communication with the banking industry about the value of CTR filings, while reducing the CTR related burden on banks. Mr. Fox pledged that it is his expectation that FinCEN’s Bank Secrecy Act Advisory Group will make recommendations by year end 2004 to reduce the volume of future CTR filings by at least 30%, which Congress has asked them to do.

Panel Discussion

Michael Zamorski, Director of the FDIC’s Division of Supervision and Consumer Protection, moderated a panel discussion featuring two Tennessee bankers and OCC Deputy Controller Ralph Sharpe. The bankers were Randall Clemons, president and Chief Executive Officer of Wilson Bank and Trust , Lebanon , TN; and Herbert Hilliard, Executive Vice President - Risk Management, First Tennessee Bank, Memphis , TN.

Mr. Hilliard encouraged the EGRPRA task force not to tinker in the margins, noting that oftentimes minor changes to regulations create more compliance costs and burden than just leaving the regulation alone. In addition, Mr. Hilliard addressed the role Congress plays in the process of regulatory burden, encouraging bankers to be cognizant “to close the front door as well as the back door” when dealing with the issue of regulatory burden.In other words, in addition to the EGRPRA process, bankers need to routinely engage in active and frequent dialogue with their Congressional representatives about proposed new legislation as well as burden reduction.

Mr. Clemons discussed a number of regulatory issues concerning the Home Mortgage Disclosure Act, Community Reinvestment Act, Patriot Act, Privacy Notices, Currency Transaction Reports, Right of Rescission, and Appraisal Regulations. Mr. Clemons closed his remarks by noting that he hoped great things would come from the outreach meeting.

Mr. Sharpe noted that regulations are creatures of statutes. He discussed that regulators’ ability to reduce regulatory burden is to a major extent subject to Congressional action. Nonetheless, Mr. Sharpe noted that sometimes it’s what regulators don’t do that reduces regulatory burden. He pointed to a recent decision by the Federal Financial Institutions Examination Council (FFIEC) not to issue corporate governance regulations, because the existing body of regulations already addressed such issues. The FFIEC concluded that any additional guidance would have less benefit than its potential cost.

Participant Comments Offered to the Panel

The Tennessee audience posed a number of comments and questions to the panel members, including the following matters.

• EGRPRA - Healthy Skepticism: Attendees expressed some initial skepticism over the EGRPRA project based upon perceptions about the success of prior efforts to reduce regulatory burden. Audience members were interested in knowing how many comments the EGRPRA task force members received and the size of the regulatory staff dedicated to the project. As of the date of the outreach meeting over 600 comments have been received, and Vice Chairman Reich and Deputy Comptroller Sharpe assured the audience that significant resources were being devoted to this project.
• Currency Transaction Reports (CTRs):Observations were made concerning perceived lack of follow-up on CTRs by law enforcement, and that bankers feel that they are being called upon to act as law enforcement agencies with respect to filings of CTRs and Suspicious Activity Reports (SARs). A number of attendees opined that banks should not be subject to CMPs for technical noncompliance with the Bank Secrecy Act.
• Interagency Coordination: An attendee complimented the agencies on recent improvement in coordination of issuance of new guidelines and regulations.
• Field Testing of Proposed Regulations A suggestion was made that the agencies field test regulations prior to industry wide implementation, to ensure that they fulfill their intended purpose with minimal burden to banks.
• Flood Insurance Idea:A suggestion was made that a more efficient method to address the flood insurance issue would be to have county taxing authorities assess the cost of flood insurance as part of real estate tax bills.
• Publicly Traded Companies:A number of attendees commented on the current definition of a publicly traded company (500 stockholders), indicating that the SEC should differentiate between publicly traded and publicly held companies given the additional regulatory requirements associated with designation as a publicly traded company.
• Risk Focused Regulatory Environment: One observer noted that the development, implementation, and monitoring of compliance regulations should be risk focused. It was suggested that for every new regulation adopted, the agencies should be required to eliminate one existing regulation.
• Level Playing Field: A number of individuals commented on the fact that banks are at an inherent competitive disadvantage with other types of financial institutions that provide the same types of products and services because non-bank financial service providers do not have to comply with many of the regulations and restrictions imposed on banks. Examples included credit unions and mortgage banking operations.

Round Table Discussion Groups In addition to specific concerns noted above, the bankers offered solutions to a number of other identified problems. To review the problems and recommendations that were identified during the afternoon small group discussions, see the Comprehensive Document – All Issues and Recommendations http://wwwdev/EGRPRA/outreachpropsolAll.html section of this website.

Luncheon Speaker - Federal Reserve Board Governor Bies

Federal Reserve Governor Susan Bies spoke at lunch and said that recent indicators suggest that the pace of economic activity remains solid, while inflationary pressures continue to be subdued. She devoted much of her speech to an examination of business and household balance sheets, pronouncing both healthy.