In 2015, the Dodd-Frank Act had its five year anniversary (Dodd-Frank was signed into law July 21, 2010). The extent of the regulation and burden on community banks has been well publicized, as well as the improvements in capital and transparency for the largest banks. Lawmakers and regulators have acknowledged the differences in supervisory expectations of community banks relative to larger banks.
While it is true that many of the more time consuming and costly measures of the Dodd-Frank Act apply only to banks $10 billion and larger, such as capital planning, stress testing, interchange fee limits and the Consumer Financial Protection Bureau’s (CFPB’s) supervision, many other requirements apply to banks of all sizes, including the CFPB’s mortgage and the Basel III capital rules.
The banking associations and community bankers have worked hard to influence the rules that implement the Act. For example, community banks retained the ability to include in capital grandfathered trust preferred securities and exclude from capital unrealized losses in investment securities caused by interest rate changes.
Senator Richard Shelby (R-Ala.), Chairman of the U.S. Senate Committee on Banking, and Congressman Jeb Hensarling (R-TX) have introduced regulatory relief bills, advocated by the banking association and community bankers across the country. The likelihood of these bills advancing in this political environment is low, but the regulatory relief effort has been gaining some momentum. The regulators have recently proposed or supported relief efforts for community banks, including exam cycles, call reporting and capital reporting.
The regulators are continuing to encourage sound risk management practices for all banks, including interest rate risk management, credit monitoring and cyber-security controls.