Impact Of Dodd-Frank Research Articles

Impact of Dodd-Frank on CEO Pay and Bank Risk

Impact of Dodd-Frank on CEO Pay and Bank Risk

The Impact of Dodd-Frank on Bankss Noninterest Expenses

This paper examines the changes in commercial banks’ noninterest expenses following the Dodd-Frank Act of 2010. We use quarterly data on U.S. bank holding companies from 1995 through 2015 to test for changes in the levels and growth rates of noninterest expenses following the passage of Dodd-Frank. We account for factors affecting noninterest expenses that are not related to regulatory compliance costs such as loan charge-offs, residential lending, deposits, and general economic activity. Contrary to other studies, we find statistically and economically significant increases in both the growth rates and the levels of noninterest expenses as percentages of total assets. The increases are most clearly identifiable for small and community banks with $10 billion or less in total assets, but they are often larger in magnitude for large and regional banks with total assets of $10 billion or more. These results are consistent for salary and non-salary, noninterest expenses.

The Impact of Dodd-Frank on Community Banks

The regulatory framework for financial institutions in the United States, including many provisions of The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), impose significant costs on community banks without providing benefits to consumers or the economy that justify those costs. The stated purpose of Dodd-Frank was to prevent another financial crisis by enhancing consumer protection and ending the era of too big to fail. However, the application of Dodd-Frank to community banks is misplaced. Community banks did not cause the financial crisis. The relationship-banking business model and market forces protect the customers of community banks without the need for additional regulation. Dodd-Frank builds on decades of one size fits all regulation of financial institutions, an ill-conceived regulatory framework that puts community banks at a competitive disadvantage to their larger, more complex competitors. The imposition of regulatory burdens on community banks without attendant benefits ultimately harms both consumers and the economy by: (1) forcing community banks to consolidate or go out of business, furthering the concentration of assets in a small number of mega-financial institutions; and (2) encouraging standardization of financial products, leaving millions of vulnerable borrowers without meaningful access to credit. Neither of these outcomes will protect consumers, the financial system, or the recovery of the American economy.