As many of America’s financial institutions continue to struggle in the face of mounting Dodd-Frank regulations, smaller community banks and credit unions have been hit disproportionately hard by the compliance burden.
“Each new law or regulation in isolation might be manageable, but wave after wave, one on top of another, will certainly overrun many more community banks,” William Grant, the president and CEO of the Maryland-based First United Bank, said during a House subcommittee hearing.
Witnesses testified in front of the House Financial Institutions and Consumer Credit Subcommittee on Wednesday, saying that the compliance burden is difficult for smaller institutions to handle due to fewer resources than larger firms.
Grant said that his banks incurs close to $3 million in compliance costs every year as a result of the increased regulations, adding that his bank is forced to make a decision between offering fewer products and services to customers or charging customers more for the services.
“Instead of money being used to make loans to hardworking people and businesses in our communities, it is being spent on consultants, lawyers and auditors,” Grant said. “Instead of investing precious capital into new products to meet the ever-changing demands of our customers, banks are paying for changes to software that assure compliance with all the new changes.”
While supporters of the 2010 financial overhaul argue that the legislation will help prevent another financial crisis, critics of the legislation contend that it puts too much unnecessary burden on smaller players that had no role in the financial crisis.