Sarbanes-Oxley overkill, bankers say

North Carolina bankers joined the chorus of voices calling on Congress to remove costly accounting regulations.

At issue is the Sarbanes-Oxley law, adopted in 2002 in reaction to accounting scandals at Enron, WorldCom and other companies.

The law, crafted by Sen. Paul Sarbanes, D-Maryland, and Rep. Michael Oxley, R-Ohio, added accounting requirements for publicly traded companies. It also included a provision, Section 404, that requires public companies to hire outside auditors to verify internal controls, that bankers find particularly odious.

"For companies as heavily regulated as banks, this is overkill, redundant and wasteful," said Paul Stock, chief lobbyist for the N.C. Bankers Association.

Without Sarbanes-Oxley, banks still draw scrutiny from agencies including the Federal Deposit Insurance Commission, the Federal Reserve, the Office of the Comptroller of the Currency and -- in North Carolina -- the N.C. Office of the Commissioner of Banks.

"We're talking about hundreds of millions of extra dollars" in compliance costs, Stock said.

The bankers group last week adopted a unanimous resolution to lobby state congressional delegates to back relief from Sarbanes-Oxley.

Industry leaders have pushed for changes in the law for some time, saying that Sarbanes-Oxley costs put U.S. companies at a competitive disadvantage. Meeting the law's requirements cost $3.8-million a year for the average public company, according to Financial Executives International, whose membership includes 15,000 chief financial officers and executives.

Business advocates, including Treasury Secretary Henry M. Paulson Jr., also argue that the rules damage the competitiveness of U.S. financial exchanges by driving more foreign and domestic firms to make initial public offerings in Europe and Asia. Experts estimate the cost of being public is a one-third lower in Europe than in the United States.

Last week, Paulson criticized the law in an interview with Bloomberg News, and on Monday Vice President Dick Cheney told CNBC that the law may have gone "too far" in safeguarding investors from corporate fraud. He also said that the administration would "be happy to work with" Democrats to change Sarbanes-Oxley.

The push to roll back the law comes at a key time. Both congressmen Sarbanes and Oxley are to retire by January and that's spurring more challenge to the law from industry and from members of the Bush administration.

"It's been hard to overcome staunch opposition from two high-ranking congressmen," Stock said. "But the fact is, they're not going to be around in the 110th Congress."

Stock said association officials will send letters to each member of the state's congressional delegation shortly after elections wrap up on Tuesday. He said the state group will also join the efforts of national groups, including the American Bankers Association and America's Community Bankers, to push Congress to act.

But Sarbanes-Oxley isn't the only regulatory burden bankers say they face. Since 2001, regulators have increasingly used the Bank Secrecy Act, passed in 1970, to try to halt money flows to suspected terrorist organizations. The act requires financial institutions to track and file reports of cash transactions exceeding $10,000 and to report suspicious activity that could signal money laundering or tax evasion.

Federal Reserve Chairman Ben Bernanke warned recently that countering money laundering is a big cost to the financial system. He said government must work to lighten the burden even as it continues to fight terrorist financing.