Community bankers sound off on Dodd-Frank

by Ryan Smith18 Aug 2016
House Republicans have made it clear that they’re no fans of the Dodd-Frank Act. And now, as they present their own alternative, they’ve gathered support from community banks.

Finance committee chairman Rep. Jeb Hensarling has long maintained that the Dodd-Frank Act places an unfair burden on smaller financial institutions. “Only Washington would claim Dodd-Frank is ‘Wall Street reform,’”

Hensarling said last month. “Dodd-Frank includes a taxpayer-funded bailout scheme for banks designated ‘too big to fail.’ It gives big banks an advantage over small ones that can’t keep up with the size, cost and complexity of all its regulations. Instead of ending ‘too big to fail,’ Dodd-Frank has created ‘too small to succeed.’”

It appears many community bankers agree with that assessment. The House finance committee gave them a chance to sound off on Dodd-Frank, and many of them weren’t particularly gentle.

 “Community banks are resilient. We have found ways to meet our customers’ needs in spite of the ups and downs of the economy,” said Tyrone Fenderson, president and CEO of Commonwealth National Bank. “But that job has become much more difficult by the avalanche of new rules, guidances and seemingly ever-changing expectations of the regulators. This – not the local economic conditions – is often the tipping point that drives small banks to merge with banks typically many times larger.”

Fenderson said that there are 1,200 fewer community banks now than there were five years ago – “a trend that will continue until some rational changes are made that will provide some relief to America’s hometown banks.”

“Managing this tsunami of regulation is a significant challenge for a bank of any size, but for a small bank with only 17 employees, it is overwhelming,” said Dale Wilson, chairman and CEO of the First State Bank of San Diego in Texas. “Today, it is not unusual to hear bankers—from strong, healthy banks—say they are ready to sell to larger banks because the regulatory burden has become too much to manage.”

Wilson said that Texas has lost 80 banks since the passage of Dodd-Frank.

“Texas has one of the healthiest economies in the country – we call it the Texas miracle,” he said. “These were community bankers – and I have talked to many of them personally – that could not maintain profitability in an environment where the regulatory compliance costs are increasing between 50 and 200 percent.”

“As I see it from my standpoint, we will see community banks continue to decline. We simply cannot afford the high costs of federal regulation,” said Les Parker, chairman, president and CEO of United Bank of El Paso de Norte. “And as one banker I will tell you this, my major risks are not credit risks, risks of theft, risks of some robber coming in with a gun in my office; my number one risk is federal regulatory risk. And I have a greater risk of harm to my bank, my stockholders from the federal government than I have anything else in this whole world. That is obscene.”

What do you think? Does Dodd-Frank need to be streamlined? Does it need to be scrapped entirely? How have its regulations impacted your business? Let us know your thoughts in the comments below.


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