As a result of the Dodd-Frank Act, community banks are under continued pressure to make sure they are compliant with current regulations. Until recently there was no scale or process in which to actually measure the burden of this compliance.
In 2012 the Government Accountability Office and the FDIC concluded that it was impossible to quantify the costs that community banks will incur as a result of complying with the Dodd-Frank Act. The American Enterprise Institute provided the most tangible information regarding regulatory burden. They found that compliance costs at small banks have already increased in recent years.
Another measurement recently found that profitability reductions resulting from regulatory burden could cause smaller banks to be unprofitable. It cited that with just the increase of two employees, such as compliance officers, results in an average 45 basis point reduction in profitability.
It would appear the burden of these new regulations have a negative affect on small institutions. More ways to measure this burden are needed to provide an accurate view of how new regulations will fully effect community banks.
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