The American Bankers Association (ABA) has taken strong exception to a recent report released by the White House Council of Economic Advisers about how “community banks remain strong” since 2010 and the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The report provides “economic evidence” that access to community banks—FIs with assets less than $10 billion—remain robust and continue to add services. For example, the annual growth rate of lending by community banks in each asset category has increased since the financial crisis. The report also said that there’s no evidence that Dodd-Frank has led to a decline in access to banks across counties, not counting the number of shuttered bank offices during the real estate boom and bust between 2006 and 2011. It noted that the average number of branch offices for community banks with assets of $100 million to $10 billion has increased since 1994, while the number of branches for the smallest community banks has remained nearly unchanged.
“Although opponents of financial reform often claim that it has harmed community banks, a closer and more comprehensive review of the economic evidence shows that community banks remain healthy,” according to the report. “In implementing the provisions of Dodd-Frank, the Administration has taken important steps to ensure that regulatory requirements are implemented in a fair and equitable manner for community banks.”
The ABA sees things quite differently and argues that financial reform is hurting community banks. “Ask community bankers this question: Since Dodd-Frank, have you hired more loan officers or more compliance officers? Then ask bank customers how much service they get from compliance officers. The current state of affairs means fewer loans, slower job growth and a weaker economy,” said Rob Nichols, ABA president and CEO. Too often, Nichols said, the rules intended for the largest banks are considered “best practices” for all banks, intensifying the hardship for smaller FIs, and arbitrary size thresholds are preventing community banks from growing because of added regulation.
“Comprehensive regulatory relief is long overdue for community banks,” he said. “These institutions are working hard to drive economic activity in America’s cities and hometowns, but the regulatory environment is holding them back.”
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