The Missouri-based Shelter Insurance has decided to exit the banking industry, citing higher operating costs associated with the increased regulatory burden of the Dodd-Frank Act.
“We were a very soundly run, profitable, growing bank that provided great rates and services,” Shelter CEO Ron Wheeling said, according to Insurance Networking News. “The government is putting us out of business.”
The firm agreed to sell $26 million in deposits and $16 million in loans to Central Bancompany, though neither firm disclosed the price of the deal. Shelter will continue to service a remaining $137 million in loans and pay off its banking division’s remaining depositors.
Wheeling said that Dodd-Frank requires the bank to provide regulators with two different sets of financial statements based on different accounting methods, which would have added $1 million in annual expenses for the bank, Insurance Networking News reports.
Doug Faucette, a banking lawyer at Locke Lord, said that the legislation should have exempted insurers acting as thrift-holding companies from submitting the financial statements, adding that the firms face an “impossible position” in having to submit two different sets of financial reports.
“There will be an increasing reluctance by insurance companies to hold onto [their banks],” Faucette said, according to Insurance Networking News.
Wheeling said that the company brought concerns about higher costs to the Federal Reserve, but the regulator was unwilling to make an exception to the requirement. Dodd-Frank’s controversial Volcker Rule will also hurt the bank’s capacity to serve as a holding company.
MetLife and Allstate also decided earlier last year to leave the banking industry. Other insurance firms that have left the banking sector over the past two years include Hartford Financial Services Group and Prudential Financial, Insurance Networking News reports.