With Dodd-Frank Reform, Community Banks Could Make a Comeback
Since the passage of the Dodd-Frank Act in 2010, almost no new banks have opened. The number of smaller community banks, with assets under $10 billion, shrunk by 14 percent from 2010 to late 2014.
While the poor economic conditions caused by the 2008 recession has certainly played a role, the 22,000 pages of regulations imposed by Dodd-Frank has clearly forced smaller banks to go under. For community banks with low margins of profit, the difference between hiring a compliance officer instead of a lending officer can be devastating.
And it’s not just the local banks who suffer. Local real estate agents in both the residential and commercial industry looking to sell property must operate in lending-starved markets. Fortunately, legislation offered by Representative Jeb Hensarling (R-TX) would provide Dodd-Frank regulatory relief for community banks willing to adopt a 10 percent assets-to-equity ratio. This bill, named the Financial CHOICE Act, could provide the regulatory relief community banks need to make a comeback.