Treasury Secretary Timothy F. Geithner has challenged bankers togive him specifics on their longstanding complaint that theDodd-Frank Act is imposing costly, confusing and burdensomeregulations on them, according to four people familiar with thematter.

The Federal Advisory Council, a group of bank executives fromeach of the 12 Federal Reserve districts, complained to Geithner ata May 10 meeting about overlapping and duplicative rules, accordingto the people. Geithner urged the bankers to prepare a study withexamples of regulatory burden, said the people, who are preparingthe report.

Geithner offered to use his ability to reach across agencies tobetter coordinate and streamline rules if he found the reportconvincing, according to the people, who asked not to be identifiedbecause they weren't authorized to discuss the study. Thecomplaints include the handling of so-called stress tests of banks'ability to weather a crisis, capital requirements and restrictionson mortgage servicing.

“It's a helpful step,” said Joe Engelhard, senior vice presidentof Washington-based investment advisory firm Capital Alpha PartnersLLC and a former Treasury official. Dodd-Frank is “overlycomplicated and excessive in certain areas, but I like whatGeithner is saying of identifying where it is overly complicatedand we'll work on that.”

Treasury spokesman Anthony Coley declined to comment on the May10 meeting or the report.

The 2010 Dodd-Frank Act ushered in the most sweeping overhaul offinancial rules since the 1930s in a bid to prevent a repeat of thecrisis that prompted taxpayer-funded bailouts of firms includingCitigroup Inc. and Bank of America Corp.

Bankers have complained that Dodd-Frank will crimp credit whileslowing economic growth and job creation. U.S. Bancorp ChiefExecutive Officer Richard Davis said in an April 17 earnings callthe “big majority” of Dodd-Frank for the company will involvepaperwork transactions and managing details.

The act imposes nearly 400 new rule-making requirements onregulators, of which 110 have been finalized and 144 have beenproposed, according to a June 1 report from law firm Davis Polk& Wardwell LLP, which advises many of the world's largestfinancial institutions.

Increased Regulation

“The quantity and quality of regulation has been increased sodramatically that it makes it difficult to do business in thefinancial services area, and a lot of those huge costs are going tobe passed on to consumers,” said Tom Vartanian, a Washington-basedpartner at the law firm Dechert LLP. “The question is, 'Where's thebalance?”'

Wayne Abernathy, executive vice president of the AmericanBankers Association and former Treasury assistant secretary, saidhe welcomed Geithner's proposal.

“I don't blame them at all with their response of 'Show us thefacts,”' he said. “That's a response we should embrace.”

Among the members of the Federal Advisory Council are JosephHooley, chief executive officer of Boston-based State Street Corp.;Vikram Pandit, CEO of Citigroup in New York; James Rohr, chairmanand CEO of PNC Financial Services Group Inc. in Pittsburgh; andU.S. Bancorp's Davis.

The KBW Bank Index, which tracks shares of 24 financialinstitutions, has dropped 9.3 percent since July 21, 2010, the dayDodd-Frank was signed into law, compared with a 20 percent gain inthe Standard & Poor's 500 Index.

U.S. economic growth slowed to a 1.9 percent annual pace in thefirst quarter, and employers added 69,000 workers in May, thefewest in a year. The unemployment rate rose to 8.2 percent lastmonth from 8.1 percent in April.

Bank executives held a conference call on May 29 to solicitassistance on the white paper from other institutions and tradegroups, including the Clearing House Association. The bankers planto deliver the report to the Treasury by the end of this month,according to the people preparing it.

Bankers are seeking to persuade Geithner to use his position aschairman of the Financial Stability Oversight Council to encouragegreater coordination among the agencies that enforceDodd-Frank.

The oversight council's 10 voting members include FederalReserve Chairman Ben S. Bernanke; Comptroller of the CurrencyThomas Curry; Securities and Exchange Commission Chairman MarySchapiro, and the Federal Deposit Insurance Corp. Acting ChairmanMartin J. Gruenberg.

Mortgage Lending

“If you took mortgage lending, you have anywhere from six toseven federal, state agencies involved in the creation of new rulesor servicing standards,” said Vartanian, who has represented banksincluding Capital One Financial Corp. and Bank of America. “Thereis substantive overlap in terms of the requirements of regulationsand jurisdictional overlap in terms of how many agencies you haveto deal with.”

The Fed, OCC, FDIC and the Consumer Financial Protection Bureauall have authority over mortgage servicing standards, for example.The Federal Housing Finance Agency is also reviewing mortgageservicing standards for the government-sponsored enterprises. TheJustice Department and the 50 state attorneys general are requiringthe largest banks to implement mortgage servicing underwritingprocedures as part of an industry settlement.

Bloomberg News

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.