Impact of Dodd-Frank on Community Banks and Credit Unions

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On September 13, 2012, the Government Accountability Office (GAO) released a report to Congress examining the impact of the Dodd-Frank act on community banks and credit unions.  The report contains lots of data relating to community banking and consolidation of the industry over the last 20 years or so, but you can skip to page 19 to read about potential impacts of the Dodd-Frank Act on community banks and credit unions.

The main thrust of the report is that, although there are a number of provisions of the Dodd-Frank Act that may affect community banks and credit unions, most of those impacts depend upon the development and implementation of rules by various agencies (Table 1 on page 3 contains a handy chart showing the various agencies and the subject matter of their regulatory authority).  Until the agencies complete their work and begin any necessary enforcement actions, it will be difficult to assess the benefits or burdens on community banks and credit unions.  According to the report, 119 of the 398 rulemakings required under the Dodd-Frank Act, or about 30%, had been completed as of July 2, 2012.  That number doesn’t even include rulemakings that are not mandatory, but are instead within the discretion of the applicable agency.

At this point, some of the impacts of the Dodd-Frank Act are expected to benefit community banks and credit unions (such as “depository insurance reforms and CFPB supervision of nonbank providers of financial services and products”), while others are expected to increase regulatory burdens (such as provisions relating to “proprietary trading, remittance transfers, and executive compensation”).  In the end, though, the title of the report says it all: “Impact of the Dodd-Frank Act Depends Largely on Future Rule Makings.”

Check dodd-frank.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.