WASHINGTON — Community bankers in rural areas complain that subjecting them to the same regulations as the big banks creates a disproportionate and costly compliance burden.
The regulations are part of the sweeping Dodd-Frank financial reform law that targeted lax oversight of Wall Street banks.
“I am forced to comply with many of the same regulations as the largest financial institutions, but with far fewer resources than the too-big-to fail banks,” said Carrie Wood, president at Timberland Federal Credit Union in DuBois, Pennsylvania, which has 9,800 members.
At a Senate Financial Institutions and Consumer Protection Subcommittee hearing Wednesday, Wood said that credit unions have been subjected to at least 202 regulatory changes from nearly two dozen federal agencies since the 2008 financial crisis.
However, Sen. Elizabeth Warren, D-Mass.,, disagreed. “We need to move away from the idea that Dodd-Frank has crashed community banks. It is just not true.”
She argued that community banks collectively had their best quarter in a decade and improving profitability five years after the adoption of Dodd-Frank.
In a 2014 KPMG community banks survey, 32 percent of the banks cited regulatory and legislative pressures as their most significant growth barriers.
Roger A. Porch, vice president of First National Bank at Philip, South Dakota, told the committee that his bank now spends over $222,000 on compliance costs every year, accounting for more than 18 percent of total overhead.
According to the KPMG survey, 37 percent of the community banks surveyed projected increases in spending on regulation compliance. Nearly 80 percent of the banks said that their compliance costs account for 5 to 20 percent of their total operating costs.
The complex and costly compliance process also stops some community banks from providing new financial products, the small bankers told the committee. For example, First National Bank does not provide home mortgage loans. Timberland Federal Credit Union delayed its entry into indirect auto lending because of a lack of employees to oversee the program and especially the compliance issues.
Sen. Patrick Toomey, R-Pa., said the Senate banking committee had offered a bill to ease some of the regulations, but it did not pass.