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Wednesday, May 8, 2013

AEI Report: Dodd-Frank Falls Harder on Community Banks

The Dodd-Frank Act is making it harder for small businesses and people in rural areas and small towns to access financial services, an American Enterprise Institute report found yesterday. The report examined how community banks are faring under Dodd-Frank’s provisions.

Banks that sell insurance are certainly finding that to be the case. New mortgage rules, for example, would limit the ability of banks to sell insurance alongside mortgages, pushing customers to look outside their trusted financial institution.

“Community banks were not responsible for the causes of the financial crisis determined by the authors of Dodd-Frank,” the report said. Yet, it found, banks with under $10 billion in assets are bearing a significant regulatory burden..."

As a result of this burden, the report found, many small banks will see their profit margins fall and either close or merge. The report’s authors argued that this will result in greater concentration of assets among large banks and inadequate service to “small businesses and individuals who do not fit neatly into standardized financial modeling, or who live outside of metropolitan areas served by larger banks.”

“Neither of these outcomes will protect consumers, the financial system, or the recovery of the American economy,” the report concluded.

Read the report.