Two years and one week ago, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law.
In the intervening time, more than 8,800 pages of rules and regulations have been written, including 3,300 pages of rules relating to derivatives alone.
With just 30 percent of the rules finalized to date, regulators are on pace to accumulate 88,000 pages of new rules for the financial industry to digest.
A number of bankers, consultants and other financial services representatives working in Westchester County said the flood of new rules has been overwhelming.
Stephen Brown, president and CEO of the Yonkers-based Hudson Valley Bank and parent company Hudson Valley Holding Corp., said the speed at which the new regulations have been finalized has put banks like his in a difficult position.
“Dodd-Frank is changing the landscape of our industry,” Brown said. “The challenge becomes not just the amount of regulations but the velocity of it all.”
Brown said the goal is the same as ever: to balance customers”™ needs with shareholders”™ concerns.
However, he said, that becomes a more difficult proposition with the added costs involved with implementing the new regulations.
“Balancing all that becomes the challenge,” Brown said, in part because a regional bank like Hudson Valley Bank doesn”™t have the diversity of revenue streams that the larger money center banks possess, “so it”™s an expensive proposition for us.”
“What has been implemented so far has already resulted in increased costs to us on an annual basis ”“ millions of dollars of increased costs,” he said.
A July 17 report by the Financial Services Roundtable, a nonprofit that represents 100 of the world”™s largest financial services companies, said Dodd-Frank has resulted in $7 billion in direct compliance-related costs for financial institutions.
There are approximately 360 financial institutions in Westchester and Fairfield County, Conn., that have been or will be affected by the new regulations brought about by Dodd-Frank, said John Allen James, executive director of the Center for Global Governance, Reporting and Regulation at Pace University”™s Lubin School of Business.
“It is a mess, it is costly, it is complex, and it”™s causing irritation between the bank”™s compliance staff and the examiners who are trying to catch up with the laws,” James said, adding that some banks he has worked with have as many as 40 examiners on the premises full time.
James had one word of advice for regulators: “Stop.”
He added, “Slow down. Let us absorb some of these and then have some sessions where everybody gets together and says, ”˜Let”™s prioritize these because there”™s no way we can handle them all.”™”
The confusion aside, there is general agreement among local bank representatives that the financial services industry is on much stronger footing now than it was prior to the 2008 economic crisis.
“In general, the industry is healthier, better capitalized, more aware and more prepared to manage risks that, as we found out over the last several years, can be either unexpected or can impact us negatively in a much greater magnitude than we might otherwise have anticipated,” Brown said. “While I don”™t necessarily like the velocity of the changes in regulation, or the cost of it, there have been some positive results.”
John Tolomer, president and CEO of The Westchester Bank, based in Yonkers, agreed that banks are now better capitalized than in previous years.
“One of the things that the ”™08 economic meltdown really established was the need for banks to have greater capital levels,” Tolomer said. “As a result of that our bank raised capital in July of last year and ”¦ as a result of that we”™ve been able to grow, we”™ve been able to increase our profitability and do all that in a way that our bank has been very well capitalized.”
According to the Financial Services Roundtable study, FDIC-insured banks currently hold $1.6 trillion in capital.
James and his staff recently marked the completion of the Center for Global Governance”™s first Certified Compliance and Regulatory Professional certificate program.
The six-month, 75-hour course was formed in partnership with the Association of International Bank Auditors and attracted professionals from a dozen global financial institutions, with topics including regulatory strategy, risk management and compliance management training.
“There”™s been a tremendous amount of interest” in the course, James said. “The community banks come to us and say, ”˜We haven”™t a clue. This is overwhelming.”™ Most of them don”™t even have a chief compliance officer.”
There will be a second session of the certificate program beginning Sept. 6. The program has been expanded to include two new modules on securities law and consumer protection law at the request of the Federal Reserve Bank of New York and the New York State Department of Finance, James said.
