Congressional Hearings |
Printable Version |
Statement of Michael B. Enzi
U.S. Senate Committee on Banking, Housing, and Urban Affairs
"Consideration of Regulatory Relief Proposals"
March 01, 2006
|
|
Thank you, Mr. Chairman.
|
I would also like to thank Senator Crapo
for his hard work on this issue. Providing regulatory relief for our nation’s
financial institutions, and the agencies who regulate them, is an important but
difficult task. There are many stakeholders and interests to balance. At last
count, the list of proposals was reaching 200. I’m sure by the end of this
process we will have even more. I look forward to reviewing this comprehensive
legislative package once it has been introduced.
|
The reason our committee is pursuing a
regulatory relief proposal is to reduce the paperwork and administrative burden
placed on our financial institutions. And we must also ensure that they are
operating in a safe and sound manner, with their customers’ best interests in
mind. However, these terms can have different meanings, depending on the bank,
the customer, and the context. A standard disclosure process used by a large
national bank is sometimes not appropriate for a small community bank, but they
are forced into a one-size-fits-all approach. There are thousands of examples
of this all over the country, including my home state of Wyoming.
|
Wyoming, like many rural states, has a
strong system of community banks and credit unions. These institutions are
often an anchor to our towns. They are community centers where Wyoming
residents can deposit checks, get a small business loan, or set up a savings
account to save for a child’s college tuition. And usually, the person sitting
across the desk is a friend or neighbor. In Wyoming, banking is done on a
personal level, and that is a great way to do business. So when we examine the
regulatory burden these banks manage, we need to look at it in a different
context.
|
A large amount of money and resources are
spent by banks filing transaction reports and disclosures required by their
regulator. This includes currency transaction reports, suspicious activity
reports, call reports, and many others. Often they can assist in investigations
and prosecutions that put dangerous felons, even terrorists, behind
bars.
|
However, some of these reports contain very
little information, but are filed for the sake of compliance. Unnecessary
reporting is a drain for law enforcement and financial institutions alike.
Banks spend important resources filing these reports, and law enforcement
agencies spend more time trying to sort the good information from the bad. This
is a classic symptom of the one-size-fits-all approach. And it hits our small
banks the hardest. Community banks often cite the time and cost of filing these
reports as their largest regulatory expense.
|
We need to take a more commonsense approach
to these processes. We need an approach that allows discretion if the customer
is a long-term account holder, or if this particular activity is an everyday
transaction for a customer with special needs. This would allow agencies to
spend more time focusing on catching the criminals. It would also give banks
more time and money to dedicate to their customers. I have been working on
another important issue for an industry familiar to me – accounting. When this
committee considered the bill that became the Gramm-Leach-Bliley Act of 1999, we
knew it would drastically change the way our financial industry operated. For
example, Title Five of the Act enumerated the obligation of financial
institutions to protect their customers’ private information, something that had
never been done on such a large scale before.
|
But for those in the accounting industry,
this was old news. Certified Public Accountants are bound by privacy laws older
and stricter than Gramm-Leach-Bliley. However, with the passage of
Gramm-Leach-Bliley, CPAs were required to disclose privacy notices like everyone
else.
|
State-licensed CPAs in all states are
prohibited from disclosing personal information unless specifically allowed by
the customer. Under Gramm-Leach-Bliley, institutions can share information
unless prohibited by a customer. There is a significant difference here, and
one that makes annual privacy disclosures for CPAs unnecessary.
|
I have been working closely with
Congressman Mark Kennedy from Minnesota on an exemption of this annual
disclosure for state-licensed CPAs who follow stricter privacy laws. While the
cost of this annual disclosure can be annoying for larger firms, it can be
deadly for small firms or sole proprietors. An exemption could save these firms
valuable resources.
|
I look forward to working with my Banking
Committee colleagues on this issue and other meaningful reforms for our nation’s
small financial institutions.
|
Thank you Mr. Chairman. I ask that my full statement be made a part of the record.
|
