According to the Federal Deposit Insurance Corporation, there were more than 18,000 financial institutions in the 1980s compared to just over 6,400 in the first quarter of 2015. Many critics blame the Dodd-Frank Act and the substantial regulatory burden that came along with its adoption as the root cause for the decline of small banks. However, looking at historical statistics of Bank closures (which are relatively steady over the last couple decades), it is difficult to determine whether the troublesome new rules imposed by Dodd-Frank are solely responsible for bank closures or mergers as of late.
There are other hurdles facing small banks such as difficulties surrounding the Basel III capital standards, fair lending/mortgage requirements and the Financial Accounting Standards Board’s proposed current expected credit loss model, to name a few. With increasing regulatory changes and interrelated factors hitting the industry (Dodd-Frank of course among them), some community banks are struggling to compete in today’s ever-growing financial markets. However, many small banks still feel confident in the strength of their relationship-based banking model which can provide them with success in the small business lending arena.
For more information or assistance please contact Robbie Sabadoz (Robert.Sabadoz@marcumllp.com), member of Marcum’s Financial Institutions Industry Group.
See attached article entitled “Is Dodd-Frank Really Killing Community Banks” written by Victoria Finkle at American Banker for more details surrounding the industry’s take on Dodd-Frank’s impact on community banks: http://www.americanbanker.com