A House committee will hold a hearing Tuesday morning examining the impact of post-recession reforms on small banks and credit unions.
“For those institutions that have survived, the regulatory burden has required staff to spend more time on compliance than on helping customers,” read a memo Wednesday from the staff of the House Small Business subcommittee on investigations, oversight and regulations.
Small financial institutions are allocating resources to “understand new regulations, and those are resources that could go to running the bank,” Hester Peirce, senior research fellow at George Mason University, said Monday. She is scheduled to testify at Tuesday’s hearing.
For example, in response to the financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act and Basel III capital requirements mandate that banks maintain a minimum amount of cash to cover losses from loans.
Although they constitute a small percentage of the banking industry in terms of assets, community banks and credit unions make up a bulk of the loans to small businesses, according to data from the Independent Community Bankers of America. Additionally, Peirce said about one out of two dollars lent to small businesses come from community banks.
About 68 percent of the 7,600 banks with deposit insurance have assets of less than $250 million, according to the Federal Deposit Insurance Corporation. Additionally, most of the 6,700 credit unions nationwide have assets averaging $150 million, according to the National Credit Union Association.