We noted recently, and skeptically, bank regulators’ broken record like drone about how Dodd-Frank is good for community banks. Community bankers seem to have taken notice as well, and are not buying the regulators’ story.
In a letter to Sheila Bair, Chairman of the FDIC, the American Bankers Association noted the following:
- Dodd-Frank dramatically constricts the sources of capital for many community banks even while regulators and examiners are demanding more capital.
- Significant and possibly burdensome new reporting requirements that may be imposed by the Consumer Financial Protection Bureau and the Office of Financial Research.
- Dodd-Frank imposes dramatically more burdensome requirements on mortgage lending, which can only be avoided for loans called “Qualified Residential Mortgages.” This will be especially harmful for community banks, because loans outside the safe harbor will require additional capital that is especially difficult and costly for smaller institutions to raise.
- Many of what may appear to be benefits of Dodd-Frank are likely to be fleeting. The change in assessment base for deposit insurance premiums is likely to provide only temporary advantage at best for many community banks.
Some of these points and more were set forth in this testimony by the American Bankers Association before a Congressional committee.
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