As the Trump administration continues to reassess and rework much of the previous administration’s policies, the fate of the largely debated Dodd-Frank legislation remains up in the air. The administration has made the stance clear on the future of regulation, recently using an executive order to pull back on burdensome regulatory requirements across the board. As an outspoken critic of Dodd-Frank, we can expect the president to push for a fairly substantial overhaul of the legislation.
The question is: what will a rollback of Dodd-Frank actually look like, and what potential impacts might it have on the banking industry and small businesses?
With the law having generated more than 20,000 pages of regulations, it’s difficult to pinpoint how and where we’ll see the bulk of reform. Despite the administration’s intent to dismantle it, it’s highly unlikely that Dodd-Frank will be completely thrown away. The financial industry needs regulation; some level of oversight is necessary to ensure economic stability and security. The challenge is figuring out where to draw those lines and how to strike the right balance.
What the U.S. has in place now is not the right balance. We’ve seen the number of banks in the U.S. steeply decline year over year, as smaller banks fold to regulatory pressures or undergo M&A in order to absorb compliance costs. Recent data from the Federal Deposit Insurance Corporation shows that the number of federally insured banks has dropped from 7,357 in 2011 to 5,980 in 2016. While some of the complex regulations surrounding Dodd-Frank do not apply to community banks such as mine, ConnectOne, the legislation has created a “trickle down” effect that has vastly impacted other community banks’ abilities to grow and provide loans for small business owners.
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