November 9, 2005
Office of the Comptroller of the Currency
Federal Reserve Board of Governors
Federal Deposit Insurance Corporation
Office of Thrift Supervision
Re: EGRPRA Burden Reduction Comments
Federal Banking Regulatory Agencies:
Thank you for the opportunity to share with you, comments that the Kansas
Bankers Association has received from our members on this most important
topic. The KBA is a non-profit organization having as its members, 350 of
the 352 Kansas banks as members.
In order to help us draft a meaningful comment letter, we asked our
members to complete a questionnaire that listed the regulations dealing with
banking operations: directors, officers and employees; and rules concerning
banking operations about which the banking agencies are seeking comments.
The questionnaire asked our members to consider the requirements of each
regulation and comment on whether the requirements were outdated,
inconsistent, duplicative, unnecessary, or unduly burdensome.
The following is a compilation of the results of the answers received on
the questionnaire:
Prohibition of Payment of Interest on Corporate Demand Deposits.
Burden of monitoring demand deposits versus lifting the prohibition
of payment of interest. A majority of those banks commenting on this
issue believed that the value of easing the burden and eliminating the
cost of monitoring demand deposits to ensure no corporation had an
interest-bearing checking account outweighed the disadvantage of having to
pay a competitive rate of interest on corporate demand deposits. There
were some banks that had the completely opposite view and who are willing
and able to continue offering sweep accounts for corporate customers,
however the unanimous consent among commenters was that the limitations on
the number of sweep accounts allowed per month should be increased.
Regulation CC: Availability of Funds and Collection of Checks.
Regulating the numbers of days a bank can place a hold on a check.
Many commenters were resigned to the existence of this regulation and have
policies and procedures in place to handle the current law. Some
commenters have experienced losses in handling fraudulent cashier’s checks
and would like to see this law revisited with regard to the ability to
place a hold on a cashier’s check. Many commenters reported that their
bank maintains same day availability for all but a very few checks and so
have not experienced any problems.
FDIC Assessments for the BIF and SAIF.
Insurance Premiums Paid to the FDIC Based on an Annual Assessment
Rate. Many commenters believe that the current risk-based system
recognizes the efforts of sound management teams and encourages banks to
maintain a high rating. Several expressed strong sentiment that the two
funds be merged, and that every institution that benefits from the deposit
insurance should have to pay something when they enter the system. One
commenter suggested that other risk factors such as the number of
inter-state locations, types of products offered and exam ratings should
be factored in to the risk-based fee assessment.
Regulation O: Limits on Extensions of Credit to Executive Officers,
Directors and Principal Shareholders.
Special Lending Limits for Executive Officers, Directors and
Shareholders. Many commenters expressed the need for the $100,000
limit to executive officers for “other purpose loans” to be raised –
several suggested raising it to $250,000. Several observed that the low
lending limit means that the bank is sending some of its best customers to
the competition. One commenter stated that no limit was needed at all as
the regulators could monitor what was appropriate for each bank. One
commenter observed that the risk of violating this regulation keeps many
officers and directors from borrowing money from the bank. Several banks
stated that their internal policies on lending to officers and directors
are more stringent than the Reg. O limits. One commenter suggested that a
possible change to the regulation to ease the lending limits and reporting
requirements described below for banks with a composite 1 or 2 rating and
with a management rating of not lower than 2 would provide some relief to
the administrative documentation of the current regulation without
creating more risk for the industry.
Duty of Executive Officer to Report Loans in Excess of Reg. O Limit
within 10 Days. Several comments suggested that this burden should not
be on the bank where the officer was employed, but rather on the lending
bank.
Annual Report to Board of Directors Regarding Correspondent Bank
Loans to an Executive Officer or Principal Shareholder. One commenter
offered that it would be helpful to have an annual date certain when this
report was required to be submitted.
Regulation L: Management Official Interlocks.
Prohibition Against Bank Management Officials from Serving Two
Nonaffiliated Organizations in the Same Market. Several commenters
believed that the regulation that explains the exemptions which would
allow otherwise prohibited persons to serve in a management position could
be stated more clearly. Most commenters urged the regulators to keep in
mind the challenges of complying with this regulation in the rural areas
where declining population is a real life challenge.
In conclusion, we would just like to thank you for the opportunity to
comment on these most important rules and regulations. Many of the banks
returning the survey offered comments on a variety of other issues as they
continue to express their frustration with the many disclosures they are
required to give to their customers. This frustration is not so much theirs
as their customers’. Some real attention needs to be devoted to the actual
benefit being realized by the bank customer as a result of the mound of
disclosures being forced upon them. We plead with you once again, that as
you review the efforts of the banking industry to comply with these various
regulations, please also keep the bank customer in mind and question
whether, at some point, the mound of paperwork is ineffective.
Sincerely,
Charles A. Stones
President
Kathleen Taylor Olsen
SVP and Associate General Counsel
