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Fast Facts: Economic Impact of Dodd-Frank

Fast Facts: Economic Impact of Dodd-Frank

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Published by: The Partnership for a Secure Financial Future on Oct 16, 2012
Copyright:Attribution Non-commercial


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September 2012To: Fast Facts List
Since 2010, the Financial Services Roundtable has been tracking reports and public statements about theeconomic impact of the Dodd-Frank Act and Basel III. The Roundtable currently has over 150 independent costestimates hosted in a public database on the Roundtable’s website. Additionally, the Roundtable published a white paper about the economic impact of Dodd-Frank last fall.
Independent studies from the last nine months include:
The Dodd-Frank Act could reduce pretax earnings for the eight large, complex banks by a total of $22billion to $34 billion annually--higher than our prior estimate of $19.5 billion to $26 billion. 
 August 2012.
The Dodd-Frank Act already has imposed $14.2 billion in direct compliance costs since its passage andwill require 25,679 full-time employees to file 51.2 million hours of paperwork annually. 
September 21, 2012.
No longer can the average consumer open a free checking account. Due to ever-increasing compliancerequirements under Dodd-Frank, most banks elected to pass these costs along to the consumer byeliminating free checking. 
July 13, 2012.
Since the adoption of Dodd-Frank, the uncertainty associated with complying with new and differentcapital requirements has made many U.S. banks more reluctant to invest in potential securitizations.This has substantially decreased the liquidity of the securitization market, impacting both the availabilityand cost of the sources of consumer and business credit. 
July 10, 2012
<Risk retention rules> would decrease loan origination volume from current levels. Almost 62% of those respondents said that volume decreases would be more than 50%. All respondents indicated thatthe cost of liquidity to borrowers would increase – over 92% said the cost increase would be 50 basispoints or more; 46% indicated that the cost increase would be more than 100 basis points.
According to independent reports, the Dodd-Frank Act:
Reduces pretax earnings up to $34 billion annually for the eight large banks
Decreases free checking accounts by 40%
Requires nearly 26,000 full-time employees to file compliance paperwork annually
Lowers the return on equity of community banks with less than $500M in assets tobetween 6-8%
September 2012Congressional Testimony, 
July 10, 2012.
40% of banks that gave an estimate of the impact of Basel III expect to raise the price they chargecompanies for loans by between half and a full percentage point, and 26% expect to raise the price of loans by more than that.
June 21, 2012.
Free checking is on the decline. In 2011, less than half of checking accounts (45%) were free of maintenance charges and balance requirements. In 2009, 76% of accounts were free.
,Fast Facts, May 31, 2012.
The new regulations are so complex that few people understand them, and it will cost them to figure itout. Companies will have to spend a lot to make sure they’re aware of the details, since most don’t haveteams of attorneys to interpret them. 
May 23, 2012.
Instead of investing in new products to meet the demands of customers, banks are paying for changes tosoftware to ensure compliance with all the new rules. Even a small reduction in the cost of compliancewould free up billions of dollars that could facilitate loans and other banking services
,May 9, 2012.
Any one particular regulation may not be that onerous or expensive, but when you add them up, it raisesthe cost of doing business for banks, and ultimately the consumer ends up paying for it. 
May 7, 2012.
Investment bankers and financial industry consultants estimated that Dodd-Frank would lower the returnon equity of community banks with less than $500 million in assets to between 6-8%. Bank investorsusually look for returns near 11-14%. 
May 6, 2012.
If regulators tighten restrictions on bank overdraft policies, it could threaten a major source of bank revenue and speed up the end of free checking accounts. Fitch Ratings. April 24, 2012.
<Derivatives> margin rules could reduce capital spending by as much as $5.1 to $6.7 billion amongS&P 500 companies alone and cost 100,000 to 120,000 jobs. 
March 23, 2012.
Elimination of fee incomes through Durbin and limitations of overdraft fees are hurting communitybanks. These fees are critical to the survival of community banking: it is key that noninterest incomehelps provide many of our banking products and services for consumers. 
 March 14, 2012.
Overdraft and interchange rules have cost the industry about $12.2 billion annually, translating into 20%higher fees for consumers. 
February 29, 2012.

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