2.  Too many regulations are interpreted, expanded or revised so that they have a larger impact than was originally intended. Or, regulations continue even where the problem doesn't turn out to be as bad as was originally thought. The "rescission process" is an example of something that banks have to deal although they didn't cause the problem. All regulations should be reviewed periodically, and, ideally, have sunset provisions so that they would disappear if not renewed.

With exceptions for certain secured or education loans, Regulation O, which was promulgated by the Board of Governors of the Federal Reserve System, generally requires executive officers to file written reports to their banks' boards of directors for debts to any other bank or banks that, in the aggregate, are greater than the larger of 2.5 percent of the bank's unimpaired capital and surplus or $25,000.  In no event may the total of such loans exceed $100,000. The purpose of this requirement is to keep banks apprised of the indebtedness of insiders, to avoid preferential lending to executive officers when there is a correspondent relationship between the banks and generally to alert banks to situations that might lead to embezzlement, self-dealing or other misconduct.

The FDIC has adopted the same limits for other purpose loans to executive officers of state nonmember banks as is contained in the Board's Regulation O for state member banks in order to avoid disparity of treatment among banks based upon their membership, or lack of membership, in the Federal Reserve System. Thus, while the FDIC welcomes suggestions to reduce regulatory burden that do not impair the safety and soundness of its institutions, changes regarding lending limits would best be made through an interagency initiative to revise insider lending. At the present time, however, we continue to support the limits contained in the Board's regulation and believe that insiders should report credit from other institutions that exceeds the current applicable limit. This is because, in practice, we have found that the $100,000 limit, rather than the $25,000 threshold, applies in the majority of banks. Typically, the total of most executive officers' credit card, automobile and other small loans do not meet the limit and such loans thus do not need to be reported.   Thank you for writing.

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2.  Too many regulations are interpreted, expanded or revised so that they have a larger impact than was originally intended. Or, regulations continue even where the problem doesn't turn out to be as bad as was originally thought. The "rescission process" is an example of something that banks have to deal although they didn't cause the problem. All regulations should be reviewed periodically, and, ideally, have sunset provisions so that they would disappear if not renewed.

I agree that it is important to keep an eye on the regulatory "solutions" to problems. Our regulatory responses should react only to real problems, and impose the least burden possible to achieve the necessary results. Guarding against unnecessary "regulatory creep" in subsequent interpretations and revisions is also important. I can assure you that we don't issue regulations, interpretations or revisions without thinking very seriously about the impact on the banks we regulate.

I agree with your suggestion about reviewing all regulations periodically. In fact, the Federal Financial Institutions Examination Council (which I chair for the next year), the FDIC and the other banking agencies will initiate a "top to bottom review" of all our regulations in the near future. Pursuant to the Economic Growth and Regulatory Paperwork Reduction Act, we will group regulations by category and then ask for public comment about how the grouped regulations are outdated, unnecessary, or unduly burdensome. After we have public comment on a group of regulations, we can take action to reduce unnecessarily burdensome requirements. We will complete the task of requesting public comment about all the groups of regulations no later than 2006.

About your "sunset" suggestion, it is important to remember that many regulatory requirements are imposed by law. As a result, it may be beyond the power of the FDIC, the FFIEC or the other banking agencies to make significant changes in the regulations without changes to the underlying laws. In addition, some regulations applicable to banks regulated by the FDIC are not issued by the FDIC. For example, you commented on the burden associated with the rescission process. We assume you are referring to the consumer rescission rights under Regulation Z, which implements the Truth in Lending Act. Regulation Z is issued by the Federal Reserve Board. The FDIC can note public concerns about Reg. Z and pass along these concerns to the Federal Reserve, but we cannot make changes to this regulation on our own.

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