Bank Warns of Consequences of Proposed Interest Reporting Rules for Nonresident Aliens

BBVA Compass is pleased to comment on the proposed regulation referenced above. BBVA Compass, a Sunbelt based bank headquartered in Birmingham, operates branches in Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas. BBVA Compass is a wholly owned subsidiary of BBVA -- a financial services group operating in more than 35 countries with over 47 million clients, 8,000 branches and 112,000 employees.

BBVA Compass strongly opposes the proposed regulation. If implemented, the regulation: (1) could put the welfare of the non resident alien depositors at risk; (2) will provide little or marginal benefit to the Internal Revenue Service, and (3) will damage the U.S. economy in general and banks specifically.

Rampant criminal activity reported recently in Venezuela, Mexico and several countries in Central America is an example of the very real dangers that people face if they are perceived or believed to have money. In the past, kidnapping of people and family members believed to be financially affluent was primarily limited to organized criminal gangs. Lately, however, less sophisticated criminals are also involved in this activity and children of middle class and upper class families are often targeted. Information regarding U.S. deposits, if obtained by criminal elements, would create very real personal safety concerns for NRA depositors and their families.

The IRS has long declined to negotiate tax treaties with certain foreign countries because they do not provide sufficient protection for confidential information. Some of these same countries are likely to try to take advantage of the information provided in this proposed regulation. Currently, there is inadequate assurance that this information would be safe in the hands of these governments. Political instability, criminal activity or simple unintentional security lapses could expose NRA depositors to potentially grave consequences.

The Commerce Department estimates that NRA's passively invest approximately $3.6 trillion dollars in U.S. banks and securities brokers. This is equivalent to 24% of our Gross Domestic Product and almost 40% of total commercial bank credit. Ample academic research suggests that weaker financial intermediation would have a significant negative impact on productivity growth and capital accumulation.

In conclusion, we believe there is very limited benefit to the proposed regulation. Instead, there is significant danger to the safety of NRA depositors and a substantial negative impact to U.S. financial institutions and the U.S. economy. We respectfully request that you withdraw this proposed regulation and continue the long-standing policy with regard to NRA depositors and provide critical liquidity to U.S. financial institutions and our economy.