White House Releases Report on the Dodd-Frank Act and Community Banking; ABA Refutes Claims

Dodd-Frank Community Banks Obama

Recently, the White House Council of Economic Advisers issued a report titled “The Performance of Community Banks Over Time.” Seeking to address industry concern that Dodd-Frank regulations have negatively impacted community banks, the report presents research related to bank branching patterns and macroeconomic conditions as “evidence” to the contrary, maintaining that “community banks have remained healthy as the Dodd-Frank financial reform has been implemented.” The report presents the following five key points as indication that community banks “remain strong” under the Dodd-Frank Act: (i) with the exception of smallest community banks, the lending growth rate has increased since the financial crisis in 2010; (ii) evidence fails to suggest that Dodd-Frank led to a decline in the number of community banks across counties; (iii) since 1994, for community banks with assets between $100 million and $10 billion, the average number of branch offices has increased; (iv) the decline in the number and market share of community banks with assets totaling less than $100 million is a result of growth; and (v) a combination of macroeconomic factors, such as low equilibrium interest rates, contribute to “a substantial portion of the drop in new bank entry in recent years.” In closing, the report reasons that the Obama Administration “has taken important steps to ensure that regulatory requirements are implemented in a fair and equitable manner for community banks.”

ABA president Rob Nichols released a statement challenging the report’s findings, claiming a “serious disconnect between [the] report and the daily reality for America’s hometown banks and the communities they serve.” Although Nichols acknowledges that the Dodd-Frank Act is not the only contributing factor causing community banks to close, he suggests that the “more than 24,000 pages of proposed and final rules belies the idea that Dodd-Frank had no impact” and emphasizes that “[c]omprehensive regulatory relief is long overdue for community banks.”