What Will Regulators Be in the Year 2000?

In the past decade, there has been heated debate about the role of bank regulation. There have been debates over whether bank activities should be regulated and to what extent. There have been debates over how to regulate. The debaters have had more difficulty than Goldilocks at finding the right balance between regulation and de-regulation.

Compliance has been a central part of the debate. Laws have been enacted, modified, added to, and changed. Regulatory burden never seems to go away or even get much better.

Regulations are clearly here to stay. What are more likely to change are regulators. The bank regulatory agencies are considering ways to change their role that would alleviate regulatory burden on banks. Changes that may be coming (if they seem to pass the test) include:
Developing automated examination procedures, with significant parts of the examination conducted at a computer in the examiner's office rather than in the bank.

Working more closely with related agencies to develop consistent regulations, training, examination procedures, and enforcement policies.

Designing and offering educational programs by regulatory agencies to help the banks they regulate understand and comply with laws and regulations.

Providing advice and assistance to banks during and between examinations, with examiners functioning in a support role as well as in an enforcement role.

Developing and offering educational programs for the public to help consumers understand their rights and obligations.

The emerging role of the regulator as an educator, or as a source of educational materials, is new. It may have interesting consequences. For example, explaining a regulation involves a different thinking and analysis process from writing a regulation. Involvement in education may cause regulators to approach regulation writing differently.

It also remains to be seen whether the roles of enforcer and educator can be compatible. In any event, there is a great deal of promise in this regulatory trend.

Copyright © 1997 Compliance Action. Originally appeared in Compliance Action, Vol. 2, No. 5, 4/97