By William J. Showalter, CRCM; senior consultant, Young & Associates

We all noticed the increased level of regulatory changes over the years by the various banking supervisory agencies – encompassing changes from new or revised statutes, as well as changes at the regulatory agencies themselves.

Financial institutions can and, if they have not already, should become active and effective players in the regulation-making process. The bank’s role is to educate the regulatory agencies about how proposed regulations will impact the industry so that more amenable, less onerous rules may result.

Writing an effective comment

Below are a few tips on how to effectively communicate your concerns to the regulators.

Organize your comment letter/submission for easy reference. Since the agencies often face a statutory deadline for their action and must process many comment letters, the organization of yours can be crucial to its effectiveness.

Arrange your comments to match the structure of the proposed rule to make it easier for the agency to process. Use subheadings that correspond with those of the proposal and clearly identify the sections you reference. The agency will typically have a number of people working on a proposal and will distribute relevant parts of your comments to staff attorneys and others responsible for those particular sections.

One effective way to organize your comment letter is first to summarize the points you wish to make. This allows prompt identification of the part(s) of the proposal you are addressing. Then you should spell out your points clearly, with sufficient detail to have an appropriate impact, but not so much as to make your comments less forceful.

• Be concise. Your comment letter should only be as long as it needs to be. Do not feel that you must address every item in the proposal. A tightly written, well-organized letter that focuses on the elements that most concern the commenter, as well as any you think are particularly positive, has more impact than one that rambles through all points in the proposal.
• Provide background. Information about the type of bank or thrift you represent can provide valuable insight and perspective for the agency. Include a brief description of your bank’s size, structure, market, and any other information that may be pertinent to the proposal.
• Concentrate on issues over which the agency has some discretion. When the underlying statute mandates a particular provision, suggesting that the agency abandon that requirement is not practical. The agency cannot simply ignore a legislative directive. Do not suggest changes that would undermine the general intent of the law implemented by the regulation. Instead, focus on how the regulators propose to implement the law.
• Be specific. Sweeping generalizations about the impossibility of complying with a proposed regulation are not worthwhile. The agency generally is required to implement some statutory mandate and cannot disregard that responsibility. Concentrate on operational, customer-impact, and compliance management issues. Give the perspective of your bank, rather than trying to infer what impact the proposal will have on the banking industry as a whole.
• Make constructive comments. Give examples of problems you envision that specific sections of the proposal will cause. Explain how you feel the negative result can be avoided, or at least reduced. Do not hesitate even to rewrite a section of a proposed regulation if you think it is unclear or misses a point. Suggest a reorganization of the provisions in the proposal to make it easier to read and understand, and to apply in everyday situations.
• Follow submission criteria. Send your comment letter or e-mail to the designated agency official, not another staff member that you know. Include the reference or docket number of the proposal in your letter to ensure proper handling. Try to follow any specific requests which facilitate processing, such as type size or spacing. Of course, mail your letter or send your e-mail in time to reach the regulator by the due date specified in the proposal. Comments may be accepted also by facsimile or personal delivery, with special instructions. Many agencies also consider comments received after the due date, but they are not obligated to do so. Also, if the agency receives a great volume of comments, late comments slow the rulemaking process.
• Back up your position. Explain why you think difficulties are likely to occur and how the proposal would produce those consequences. Be specific and provide any facts, data, or anecdotal evidence you think will prove your point. Anecdotes can be particularly effective in helping the regulators understand the practical implications of what they are proposing. If an existing regulation is being amended, provide statistics on how much it costs your bank to comply with this particular requirement. If the proposal is a new regulation, estimated cost information would be helpful to the agency.

Try to show, when appropriate, how these costs seem to outweigh the intended benefit of the regulation to your customers or the banking industry. Impact on customers is a key issue in rulemaking by the agencies. When proposed rules are likely to curtail current or new products, reduce credit availability, cause confusion, increase costs to customers, limit access to customer contact staff or services, or have other negative effects for customers, you should raise these issues in comment letters and e-mails. While the regulator may not be able to implement your suggested change, compelling, concrete details can help them adopt your suggestion in some form.

Conclusion

Too often bankers choose not to participate in the regulation-making process. They say that they don’t have the time or the communication skills or don’t think they can make a difference. However, writing comment letters is similar to voting. If you don’t exercise the power you have, you can’t complain about the outcome. When you do comment, you can positively affect the design and development of regulations.

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