Thirty-three percent of banks with assets under $50m would become unprofitable if they were to add just two extra compliance employees, according to a paper released by the Federal Reserve Bank of Minneapolis.
“It’s an unbelievable amount of work to be able to implement these changes,” Nanci Weissgold, a lawyer with K&L Gates, told MPA of hiring compliance staff. ““The biggest challenge that I see is that there are a lot of new requirements and most of them take effect in January 2014.”
The CFPB yesterday released guidelines on what examiners will be looking for under the new regulations going into effect next year, including those on appraisals, escrow accounts, compensation and qualifications for loan originators.
Weissgold said data sharing among different departments and communication among teams to be prepared can take months to achieve, and not every company can afford to increase their teams to stay compliant.
Even if they do, just half of a full-time equivalent employee would make 6% of under-$50m banks unprofitable, according to the Federal Reserve Bank of Minneapolis.
Researchers sought to quantify the cost of increased regulation on community banks by modeling the impact of new regulatory costs as the hiring of additional staff, resulting in higher total compensation and lower profitability. The researchers then analyzed the changes in the distribution of community bank profitability.
They also developed a downloadable calculator into which banks can input their own asset size, full-time employee head count, and compensation levels to assess their own compliance burden.