GETTING READY FOR THE DODD-FRANK ACT

How is your bank getting ready for the new banking law?
Banks face one of the most daunting banking laws in years in the pending Dodd-Frank Wall Street Reform and Consumer Protection Act. ABA estimates that more than 300 regulatory projects will be launched in the federal agencies, and many of those will wind up in some fashion on banks' doorsteps.

In the ten-plus years of Pass the Aspirin's existence, does anything else come close to the headaches this new law will cause? We asked for bankers' preliminary thoughts on how they'll handle Dodd-Frank regs, including:

"Pass the Aspirin" and tell us how your bank plans to tackle the upcoming regulatory tsunami.

Blair Hillyer, chairman and president, First National Bank of Dennison, Ohio said:

	We are expecting more overall expense and additional staff for compliance. We are already planning on increasing loan rates to pay for it. This cost recovery will fall on our smaller borrowers, both consumer and commercial.
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July 30, 2010
Votes: +0

Rheo Brouillard, resident and CEO, Savings Institute Bank & Trust Co., Willimantic, Conn. said:

As far as concerns go, they?re really with what hasn?t been defined in the legislation and left up to the regulators and the new Bureau of Consumer Financial Protection. The latter is of most concern, in particular, depending on how aggressive the leadership wants to be in terms of consumer advocacy. The potential exists for significant changes in the products we offer and the pricing of those products, on top of additional regulatory burdens and related costs.
At this point we do not anticipate adding staff to handle compliance. This may change, however, as the level and degree of new rulemaking from the various agencies begins. We do not anticipate exiting any business lines as a result of the Dodd-Frank legislation.
We expect that the legislation will negatively affect the bank?s profitability by both reducing fee income as the regulators, in particular the Bureau, begin their rulemaking, and in increased expenses to comply. Reduction in interchange revenue is certainly an area we expect to see affected early. Although we do not expect to add to staff, costs will increase as a result of anticipated required disclosure changes and from costs associated with additional reporting requirements.
Are there hidden opportunities in Dodd-Frank?
One could argue that the impact may be greater on the much larger banks, due to changes in how the FDIC premiums are calculated and the impact of lost revenues (interchange and overdraft, though the latter is not part of Dodd-Frank) and that therefore they may make changes that disenfranchise some customers. (For example, they may eliminate free checking.) However, I do not see them substantially losing any of the dominant market share that they have either built up or been given by the government.
If there is an ?opportunity,? it may be that the added costs, reduced incomes, and added regulatory scrutiny could ultimately have a disproportionate and sometimes debilitating effect on some community banks. The boards of these banks may decide or be forced to merge or sell, creating an opportunity for those willing and able to meet the new challenges.
While not the kind of opportunity one would expect from a Senator who promised ?not to harm community banks? [Sen. Dodd], it is nonetheless a distinct possibility.

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July 30, 2010
Votes: +2

Mike Magee, president and CEO, Indpendent Bank Corp., Ionia, Mich. said:

I was hoping that when the final reform legislation passed, it would clarify things for the industry. It hasn?t done that at all. It?s going to take months?even years?for committees of regulators to define the actual implementing regulations. Potential investors in banks are still concerned, too, because they see a lot of uncertainty about the law?s impact on the financial community. That?s not good, not when bankers are trying to raise capital right now.
As far as our staffing, until the final regulations come out of the committees, I don?t know if we?ll be staffing up. That?s part of the confusion this is causing. So is the Bureau of Consumer Financial Protection. How long it will take to get organized and what it will really be governing is unclear.
That?s the issue with the law in general, really?so many key elements that are still uncertain. And I don?t feel that the law really fully addressed ?too big to fail.?

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July 30, 2010
Votes: +1

William Grant, chairman and CEO, First United Bank & Trust, Oakland, Md. said:

I am most concerned about the Bureau of Consumer Financial Protection and the broad, unchecked powers that it represents. While I do not anticipate adding staff, dozens of associates will be asked to work extra time in an effort to understand and implement the law?s requirements. While we are unsure if we will exit any business lines because of this legislation, there is no question it will negatively impact profitability.

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August 04, 2010
Votes: +1

Gregg Vandaveer, president and CEO, Sooner State Bank, Tuttle, Okla. said:

This bill will cause a lot of small-town banks to sell or merge, which will harm small towns. We?re the banks who support school systems. Most banks will need to add at least one person. Free checking could be a thing of the past. Any gain in the FDIC assessment calculation will be offset by the cost of compliance. Opportunities will increase for compliance consulting and new technologies to help us comply.

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August 04, 2010
Votes: +2

Vernon Hirata said:

	We are a plain vanilla savings and loan under the OTS. We have not had the increase in mortgage foreclosures that the mortgage bankers have had in our state. We have heard that the OCC does not believe in a single line of business. We are concerned that with the change in regulator we will be forced to expand too quickly into other loan areas.
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August 06, 2010
Votes: +1

Mike Murphy, EVP/CFO, First American Bank, Norman, Okla. said:

The following reflects my own opinion and may not necessarily reflect the opinion of my bank.
The Dodd-Frank bill is a work in progress. There will be many modifications throughout the rulemaking process from the various regulators, particularly from the Bureau of Consumer Financial Protection. Bank staff will be redeployed from helping customers and serving them to complying with the law, just as dollars and capital will. Bank expenses will continue to climb ? just as they have the past 2 ½ years due to increasing FDIC insurance premiums, compliance costs, and audit requirements. Revenue opportunities will be lost, with decreasing net interest revenue (a function of the economy that remains stifled); declining overdraft income (a function of increased regulation); and lost interchange income (a function of congressional ignorance of how retail transactions actually work).
Some people will see opportunities in increased deposit insurance coverage and allowing the payment of interest on business accounts. But we pay for the extra insurance coverage through the need for greater reserves at the FDIC. And payment of interest on business accounts will become the norm and not a differentiator that attracts business.

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August 12, 2010
Votes: +3

James Stackhaus, CRCM, audit/compliance officer, First State Bank of Kansas City, Kan. said:

My bank is doing its level best to stay abreast of the ever-changing compliance landscape so that we are not caught unawares. Having said that, everything is changing so fast and so often that the best we can do is be aware. Being proactive, which would be optimal, is almost impossible. Therefore, we wait, watch, listen, and react as quickly as we can. Keep your life preserver and swim fins handy, it's going to be bumpy ride.

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August 16, 2010
Votes: +1