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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 to between 6-8%

Since 2010, the Financial Services Roundtable has been tracking reports and public statements about the economic impact of the Dodd-Frank Act and Basel III. The Roundtable currently has over 150 independent cost estimates 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 $22 billion to $34 billion annually--higher than our prior estimate of $19.5 billion to $26 billion. Standard & Poors Report, August 2012. The Dodd-Frank Act already has imposed $14.2 billion in direct compliance costs since its passage and will require 25,679 full-time employees to file 51.2 million hours of paperwork annually. Federal Register. September 21, 2012. No longer can the average consumer open a free checking account. Due to ever-increasing compliance requirements under Dodd-Frank, most banks elected to pass these costs along to the consumer by eliminating free checking. American Banker, July 13, 2012. Since the adoption of Dodd-Frank, the uncertainty associated with complying with new and different capital 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 availability and cost of the sources of consumer and business credit. Congressional Testimony, Tom Deutsch, Executive Director, American Securitization Forum, 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 that the cost of liquidity to borrowers would increase – over 92% said the cost increase would be 50 basis points or more; 46% indicated that the cost increase would be more than 100 basis points. September 2012

Congressional Testimony, Paul Vanderslice, President of Commercial Real Estate Finance Council, July 10, 2012. • 40% of banks that gave an estimate of the impact of Basel III expect to raise the price they charge companies for loans by between half and a full percentage point, and 26% expect to raise the price of loans by more than that. Ernst & Young, 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. Bankrate Checking Survey, Fast Facts, May 31, 2012. The new regulations are so complex that few people understand them, and it will cost them to figure it out. Companies will have to spend a lot to make sure they’re aware of the details, since most don’t have teams of attorneys to interpret them. Mitch Stebal of Busey Bank, Washington Post, May 23, 2012. Instead of investing in new products to meet the demands of customers, banks are paying for changes to software to ensure compliance with all the new rules. Even a small reduction in the cost of compliance would free up billions of dollars that could facilitate loans and other banking services. William B. Grant, CEO of First United Bank of Trust, May 9, 2012. Any one particular regulation may not be that onerous or expensive, but when you add them up, it raises the cost of doing business for banks, and ultimately the consumer ends up paying for it. Doug Cruickshanks, CEO of FirstBank, May 7, 2012. Investment bankers and financial industry consultants estimated that Dodd-Frank would lower the return on equity of community banks with less than $500 million in assets to between 6-8%. Bank investors usually look for returns near 11-14%. Reynolds, Bone, & Griesbeck, 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 among S&P 500 companies alone and cost 100,000 to 120,000 jobs. Treasury and Risk Magazine's Coalition for Derivatives End-Users survey. March 23, 2012. Elimination of fee incomes through Durbin and limitations of overdraft fees are hurting community banks. These fees are critical to the survival of community banking: it is key that noninterest income helps provide many of our banking products and services for consumers. Congressional Testimony, Ignacio Urrabazo, President of Commerce Bank, March 14, 2012. Overdraft and interchange rules have cost the industry about $12.2 billion annually, translating into 20% higher fees for consumers. Javelin Strategy & Research. February 29, 2012.

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September 2012

The [Volcker Rule of the Dodd-Frank Act] would result in a decrease in liquidity and increase in price instability in many markets in the U.S., but will also have negative effects on markets globally, as banks will be forced to reduce the quality of their market-making services to comply. Institute of International Finance, February 2012. The Volker Rule cost American businesses up to $315 billion, increase borrowing costs by up to $43 billion per year, require 6,600,000 hours for implementation, dramatically which reduces liquidity Oliver Wyman Study, January 2012.
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September 2012

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