Bankers welcome Dodd-Frank changes

By MIKE LEWIS
mlewis@crossroadsbizjournal.com

Some area bankers are taking a long look at this year’s reform to the Dodd-Frank banking regulations.

“It could be months, if not a year or two, before we really see the impact of this,” said Mark Harrell, president and CEO of CNB Bank, a community bank with offices in the Eastern Panhandle of West Virginia and in Washington County, Md.

The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in the wake of the banking crisis of the last decade. But critics contend that the measure went too far in many respects. 

And community bankers argued that some of its rules, such as requirements for stress testing and stiff rules governing lending, were too burdensome and didn’t make sense for smaller institutions.

“On our end, there was a need to protect consumers — sometimes to protect them from themselves. … I’m a firm believer that we need to protect consumers. That’s our job,” Harrell said in a recent interview.

“(But Dodd-Frank) had consequences for community banks and, quite candidly, we weren’t part of the problem.”

In May, the House voted 258-159 to approve a rollback of the Dodd-Frank regulations, after the Senate passed the measure earlier this year.

At the time, Rob Nichols, ABA president and CEO of the American Bankers Association, said, “For the first time in nearly a decade, lawmakers from both parties have chosen to right-size financial rules that were not working as intended and holding the economy back. There is certainly more to do to recalibrate regulations and tailor them based on a bank’s risk profile and business model, but the common-sense changes … will help America’s banks, particularly community banks, get back to the basics of lending to creditworthy borrowers and businesses.”

At his CNB office in Berkeley Springs, W.Va., Harrell agreed with that assessment.

Harrell noted that a majority of the Dodd-Frank legislation remains intact. But he also said lawmakers recognized that “one-size-fits-all” regulation is not the best approach to banking.

“There are certain circumstances where it makes sense to be flexible,” he said, and community banks are positioned to offer that flexibility to customers.

For example, he said, Dodd-Frank put strict limits on the way banks considered mortgage loans. It also had provisions that put banks at steep risks. The reform, he said, “allows us to do some common-sense banking” to more accurately assess the customer’s finances and the bank’s risks.

“I’m not going to put you in that bad spot. … We’re making the decisions right here,” he said.

Dodd-Frank’s stress testing requirements also proved costly for large banks as well as small ones. CNB is “a well-capitalized bank,” he said, but it does not have the staff and other resources that large banks do to complete the stress testing requirements.

“Eventually, the customer pays for that, or a part of it,” he said.

John F. Kilduff, corporate affairs officer for Patriot Credit Union, also said the reform is welcome.

“It’s important to understand that credit unions played no role in causing the financial crisis that occurred in 2008,” Kilduff wrote in an email. “And so it was wrong from the beginning to apply the 2010 Dodd-Frank law to credit unions, including Patriot.

“We exist to serve our members, to help them improve their financial lives. And so we applaud Congress’ recent improvement to the Dodd-Frank law that frees small- and medium-sized financial institutions from unnecessary regulatory and compliance burdens. We hope going forward to see more common-sense regulatory relief.”

Federal regulators are still taking steps to write policies and implement the reforms passed by Congress. Some of those came in June and concerned the stress test requirements.

The June announcement also drew praise from Nichols, the ABA chief.

“Today’s action will spare many banks from having to participate in stress tests that both regulators and banks have said provided little value and only distracted from more effective safety and soundness tools,” Nichols said in a statement. “Instead of a one-size-fits-all approach, regulators are now bringing us closer to a program of tailored supervision in stress testing, which will allow banks to devote more of their time and resources to serving their customers and communities and helping grow the U.S. economy. We hope regulators will move quickly to tailor regulations for banks of all sizes as directed by the new law.”