Regulatory Burden

Over the last several years, a growing chorus of protest has arisen from the banking and thrift industries over what many view as an excessively complex patchwork of federal banking laws and regulations. The banking industry is particularly concerned about the cumulative burden of regulation and its effect on a bank's ability to make enough credit available to worthy borrowers. This report provides an overview of the regulatory burden studies recently done by, or on behalf of, the federal banking agencies and several of the major banking industry trade associations. GAO also describes the major regulatory burdens addressed in those studies and agency actions or initiatives related to each issue. The results of GAO's review should prove helpful in assessing the appropriateness and effectiveness of administrative, legislative, and regulatory initiatives to ease burdensome regulation and to boost credit availability.

GAO found that: (1) all of the federal banking agencies and most industry trade associations have released studies and surveys on regulatory burden, but none comprehensively addressed the issue; (2) some of the studies had serious methodological flaws; (3) regulatory burden issues that concern the industry include safety and soundness regulations that focus on appraisal requirements and duplicative examinations, consumer protection requirements, and reporting requirements; (4) federal banking agencies are concerned about the possibility that regulatory burden may be affecting the availability of credit, and have launched a series of initiatives to reduce unnecessary regulation and streamline bank supervision; (5) the initiatives include proposals to amend real estate appraisal procedures, allow higher aggregate lending limits, and reform the procedures required by the Community Reinvestment Act; and (6) a deliberate and comprehensive approach is necessary to best understand how to alleviate the effects of regulatory burden without sacrificing industry stability or individual institutions' safety and soundness.