Leaders within two similar trade groups have differing opinions on the weight of the burden banks must shoulder as a result of Dodd-Frank.

In a recent talk during a monthly meeting of the Connecticut Community Bankers Association, Terry Jorde, senior executive vice president and chief of staff of the Independent Community Bankers Association (ICBA), said while Dodd-Frank does indeed add weight to a community bank’s regulatory load, most of the complaining bankers do regards regulations that were “in the pipeline” prior to Dodd-Frank’s adoption.

She said it is important that community banks learn exactly what Dodd-Frank’s effects will be for them – without being swayed by arguments made by the nation’s largest banks.

Those large banks, which Jorde said are the true target of the law, have thus far been successful in convincing community banks that Dodd-Frank puts their livelihoods in jeopardy.

“When you hear the Wall Street banks talk about Dodd-Frank, you hear them talk about how we have to repeal Dodd-Frank because it’s going to destroy the community banks,” Jorde told Banker & Tradesman. “I think it’s very confusing to community banks. Bankers don’t really know what’s in there. There are disclosures policies, trading requirements. It is overwhelming.”

“There are certainly things in there that ICBA fought, but we were also realistic going into this.” Jorde continued. “As a trade association that solely represents community banks, we had to be at the table.”

Different Perspectives

But the ICBA’s perspective may be different than that of banks in Massachusetts, Connecticut, New England – perhaps much of the east coast.

Getting an early seat at the table may have made it impossible for the ICBA to balk at some of Dodd-Frank’s potentially onerous requirements, Frank Keating, president and CEO of the American Bankers Association, told Banker & Tradesman during a recent visit to Boston.

Specifically, Keating pointed to the so-called Volcker Rule; new, greater capital requirements included in the act; the potential for banks to have to register with the U.S. Securities and Exchange Commission as municipal advisors if they do business with town governments; the doubling of the FDIC’s Deposit Insurance Fund; and greater risk retention limits and rules that make it more expensive to use derivatives to offset costs.

“It’s a tremendous burden,” Keating said.

And the burden isn’t felt only if all of these requirements become reality for community banks – preparing for that eventuality has costs too.

The differing positions offered by the banking industry advocates on the potential effects of Dodd-Frank may have their roots in the two associations’ members.

The ABA represents small and large banks alike. The ICBA represents only community banks – some of which are much smaller than the typical Massachusetts institution.

It’s the banks in the middle that have the most to fear. Very small ICBA member banks are, in fact, too small to have to worry about Dodd-Frank. And the largest banks in the country have the manpower to confront the parts of the act they don’t like.

But for banks with a national median size of 37 employees, the act is “overwhelming,” Keating said.

Streamlining

John Skarin, senior vice president at the Massachusetts Bankers Association, said bankers are well aware of the difference of opinion between the ABA and the ICBA, which makes it important for the MBA to stay on top of Dodd-Frank developments.

“There are provisions in the bill that are only going to impact the large banks,” Skarin said. “But the devil’s in the details. There are ways to implement things so they only reach the big banks, but it’s extraordinarily complex.”

In certain instances, Skarin said, “instead of [regulators] saying, ‘Here’s what’s allowed,’ they said, ‘Here’s what you can’t do, and you have to have a plan in place to show us that you don’t do this.”

“Does the SEC municipal advisors rule mean everyone who works at a bank where a municipality deposits money or has a relationship has to register with the SEC? That wasn’t the purpose,” Skarin continued. “As regulators start writing these rules, there’s a lot of potential for creep. Not a lot has been written yet, but in the three or four we have seen, they’ve used a broad brush.”

Skarin said the fear among banks is that rules and regulations meant for larger banks will get “pushed down” to medium-sized banks and “the smallest institutions,” even if they’re not called rules or regulations.

“We’ll call it best practices or guidance,” Skarin said. “Large banks have lots of resources to handle those things. At Citibank, they have hundreds and hundreds of employees to deal with this. Smaller banks don’t have those resources and these issues are very, very real.”

“In the last five or 10 years, there have been a lot of new regulations put on the industry, and while they may be good public policy, they don’t help banks with their income,” Skarin said.

“They may help catch banks that are laundering money or supporting terrorism, but it’s an additional burden and an additional expense.”

Keating echoed Skarin in that concern.

Keating told Banker & Tradesman that new regulations are piled upon banks almost without regard for regulations already on the books – creating a complicated, repetitive and costly maze of rules that decrease efficiency and make banks seem unfriendly to business.

“Now you have another piece of legislation that’s added to that without anything else being taken away,” Skarin said. “I think there’s a realization among the regulators that we need to update, streamline and make it more efficient. Or in some cases, maybe get rid of some regulations.”

Frank Keating

Terry Jorde