Bankers Frustrated by Dodd-Frank Act

by Paul Gatling  on Monday, May. 7, 2012 12:00 am  

The Dodd-Frank Act isn't very old, but its effects are causing bankers to age rather quickly.

The law, fully known as the Dodd-Frank Wall Street Reform & Consumer Protection Act, was signed in July 2010. The official purpose of the law, passed in the wake of America's financial crisis, is to "promote the financial stability of the United States by improving accountability and transparency in the financial system, to end ‘too big to fail,' to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices and for other purposes."

The enhanced oversight and regulation affects several industries and pieces of legislation, contains numerous amendments to existing laws and creates several new laws as well, most of which haven't even been implemented yet.

The document is nearly 2,500 pages long.

"It takes a scholar to interpret it," said David Wills, the chief operating officer at Bank of Gravett in the Benton County town of Gravette. "It's unyielding."

Dodd-Frank requires 400 new rules, and only about 140 of those - about one-third - have been completed, meaning they've been confirmed and compliance dates have been set.

A report in the February issue of The Economist stated, "It is the risk that the Dodd-Frank apparatus will smother financial institutions in so much red tape that innovation is stifled and America's economy suffers."

To further illustrate the point, Frank Keating, president and CEO of the American Bankers Association, said regulators had estimated that banks would have to spend 6.6 million hours to implement the Volcker rule, a key component of Dodd-Frank that would ban banks from proprietary trading, in which banks use their own capital on financial bets.

More than 1.8 million hours would be required every year in perpetuity, translating into 3,292 years, or 3,000 bank employees, to comply with this rule.

"It's spooky," said Charlie Cross, president and CEO of Cornerstone Bank in Eureka Springs. "You hope some relief and common sense will win out, but it's spooky what could be heading towards us. If it keeps going the way it's going, we haven't seen anything yet."

Trickle-Down Seen
Last month, Federal Reserve Chairman Ben Bernanke told the Independent Community Bankers of America conference that Dodd-Frank would most likely not affect community banks. But Cross disagrees, saying the regulatory environment that targets big banks would eventually trickle down and create a more difficult environment for community banks to operate in.

At least, that is the conventional wisdom.



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