July marks the two year anniversary of the passage of the 2010 Dodd-Frank Act, and while the legislation was intended to safeguard the U.S. financial system, community banks have struggled under the financial reforms.
“These pressures are slowly but surely strangling the traditional community banks and handicapping their ability to meet the credit needs of their communities,” Matthew H. Williams, the chairman and president of the Nebraska-based Gothenburg State Bank, said.
Small banks have sought to differentiate themselves from America’s largest financial institutions, the abuses of which Dodd-Frank was designed to curb. Though Dodd-Frank exempts community banks from many provisions of the legislation, many small banks have struggled with falling revenue and rising costs in addition to an increasing compliance burden.
Chairman and CEO Frank Sorrentino of the North Jersey Community Bank said that community banks have struggled to meet the needs of customers under the increased regulatory pressure.
“Of course we want to lend, but the issue is we may have our hands somewhat tied for fear of where these regulations are going,” Sorrentino said, according to Marketplace.org.
The House Financial Services Committee plans to spend the month of July holding hearings to examine the impact of Dodd-Frank and what House Republicans say are costly and burdensome provisions.
“Supporters of Dodd-Frank sold it to the public as ‘tough Wall Street reform,’ but in reality its red tape hurts businesses and small-town banks far from Wall Street that had nothing to do with the 2008 financial crisis,” the HFSC said, The Hill reports.