The Obama administration touted the 2010 Dodd-Frank Act as an end to “too-big-to-fail,” but the legislation may actually benefit America’s megabanks.
Small banks have voiced concern regarding the legislation’s impact, saying that Dodd-Frank will lead to the “Walmartization” of consumer banking as smaller institutions struggle to deal with the regulatory onslaught, The Examiner reports.
“There is a certain size and scale that [banks] simply will have to get to in order to handle the new changes, and a little community bank that has one branch in one location in a small town will likely struggle to survive on its own,” Kim Barnes, the president and COO of The Callaway Bank, said, according to The Examiner.
Barnes said that Dodd-Frank weakens the community banking relationship.
“Our ability to do relationship banking is inhibited to some degree by additional regulation because it doesn’t give us the flexibility to maybe create a product for you that fits you best,” Barnes said, The Examiner reports. “The added burden of regulation makes for more vanilla products.”
Two provisions of Dodd-Frank, including the creation of the CFPB and the Volcker Rule ban on proprietary trading, were intended to halt the growth of mega-financial institutions. The Volcker Rule prohibits banks from engaging in risky trades with client funds but allows firms to hedge risk.
Despite the pending prop trading ban, Goldman Sachs is still involved in proprietary trading. Michael DuVally, a spokesman for Goldman Sachs, said that its multi-strategy investing arm is prepared to make future changes.
“We have made changes to the strategies this business historically has employed to bring them into compliance with our current understanding of the Volcker rule,” DuVally said, according to The Examiner. “If the final rule requires additional changes, we’ll make them.”