A provision in the Dodd-Frank financial overhaul legislation added 20 home mortgage reporting requirements to the 26 already in effect, leading experts to wonder if the flood of new paperwork will regulate community banks out of business.
“I’ve yet to see the benefit to the customer,” Alesia Harlan, a vice president and compliance director at City State Bank in Norwalk, said, the DesMoinesRegister.com reports. “It’s highly technical and confusing for the borrower.”
According to Harlan, it takes at least an hour to review each application to ensure that it complies with federal regulatory standards.
Community banks consider the new regulations a threat to their industry as larger banks have resources to comply with the complexity of the new rules. It is becoming too difficult and expensive for smaller banks to comply.
“Bank of America can fill a skyscraper with attorneys to comply with all the rules and regulations, but a community bank can’t do that,” Jim Schipper, Iowa’s banking superintendent and the state’s chief regulator, said, the DesMoinesRegister.com reports.
Small banks in the United States have been shrinking for decades. In 1984, banks with more than $10 billion in assets controlled 28 percent of the banking industry. By the beginning of this year, they controlled 70 percent. Today, smaller banks are holding 11 percent of the market, compared with their 40 percent holding in 1984, the DesMoinesRegister.com reports.
Experts said that Dodd-Frank regulations will only increase the pace for larger banks to take over the market.
Des Moines’ congressional representative Tom Latham, is a former bank teller and small business owner, voted against the new regulations in the financial sector.