Bankers Frustrated by Dodd-Frank Act

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

"The effort to stay in compliance is our main problem," he said. "I understand that it has to be that way to a certain degree, but it's almost not a free-enterprise business anymore."

Wills said that in the last two years the cost of underwriting a home loan had more than doubled to about $1,000.

"Used to be, you could [process] a home loan in a week," he added. "Now it can be up to six weeks. It's not as easy as it once was."

To accommodate this development, Wills said, the bank has "realigned" job descriptions to monitor compliance issues. Compliance, he said, "is basically 75 percent of what a person's job is now."

James Smith, the northwest Arkansas market manager for Missouri-based Great Southern Bank, isn't in the same boat as a community banker, but he does recognize the burden to do business has become more expensive for a smaller bank.

As of March 1, annual compliance costs of Dodd-Frank, according to the Financial Services Roundtable, are already more than $7 billion, despite the fact only about one-third of the regulatory rules have been completed.

The projected number of new personnel required to comply with Dodd-Frank is nearly 27,000.

Bigger banks can absorb that. Smaller banks can't.

"If you're a smaller operation, you've still got to set up all the infrastructure to comply with the regulations, whereas a larger bank can basically take that same infrastructure cost and spread it over many locations or many states or many departments," Smith said. "So that initial up-front cost, they don't have the ability to spread it over very much, so to speak."
Ominous Forecast
So what does this new environment of more stringent and complex regulations mean for a community bank?

If there is no relief, "less of ‘em," Holmes said matter-of-factly.
Right now, the average bank in Arkansas has about $175 million in assets with about 38 employees.

Most on the lower end of that average are hiring a compliance officer instead of hiring a new lender, teller or someone in operations. Compliance is not a profit center. It's a cost center.

"Instead of having a new lender out developing in the community," Holmes said, "you've got someone in there scouring through hundreds and hundreds and hundreds of pages of [regulations] telling you what you can and can't do."



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