Commerce Bank President Ignacio Urrabazo warns Dodd-Frank could destroy community banks

Ignacio Urrabazo

Commerce Bank President Ignacio Urrabazo testified in front of the Subcommittee on Financial Institutions and Consumer Credit on Wednesday, saying that the Dodd-Frank Act could destroy the community bank system.

“The regulators failed every bit as badly as the industry, but they have never been called to judgment,” Urrabazo said. “Congress’s holistic approach to fix everything in the financial sector has created unnecessary and inflexible rules.”

Urrabazo also expressed concern regarding the impact of the Dodd-Frank regulatory burden on community banks.

“The Dodd-Frank Act is 848 pages long,” Urrabazo said. “This action by Congress is unprecedented. The laws that set up America’s banking System in 1864 ran to 29 pages, the Federal Reserve Act of 1913 went to 32 pages, [and] the Banking Act that transformed American finance after the Wall Street crash, commonly known as the Glass-Steagall Act, spread out to 37 page[s]. I ask you how will [our] community banking system survive under the weight of Dodd-Frank?”

Urabazzo said that even though many of the Dodd-Frank regulations have yet to be implemented, the outcome so far has been less than desirable.

“The Dodd-Frank bill has not been fully implemented, but we are already seeing its effects,” Urabazzo said. “While the Dodd-Frank bill has some necessary provisions that are required for systematic risk and certain complex financial products, we again see that good intentions for the short-term will have unintended horrible consequences for the long term.”

Urabazzo also emphasized the impact of the mounting regulations on community bank customers.

“We have put in place very inflexible and rigid underwriting standards to avoid criticism,” Urabazzo said. “On the surface, this sounds very appropriate, but in the trenches we are now rejecting many long-time customers.”

Comments are closed.