Dodd-Frank financial oversight reform legislation has taken a toll on Kentucky’s community bank numbers since its 2010 passage in response to the near collapse of the nation’s financial industry in late 2008.
While mitigation measures are finally showing signs of life in Congress, roughly 15 percent of depository institutions in Kentucky – 33 banks – closed between the end of 2009, the year before Dodd-Frank passed, and March of this year, according to the state’s Division of Depository Institutions, which supervises state-chartered banks. In 2016 five banks closed. Already this year four have.
As its rules have been developed, the federal legislation has required Kentucky bank owners to put more capital into institutions, increased compliance obligations that increased their costs, but made it harder for them to qualify borrowers for the loans that create income.
Kentucky bankers have been among the years-long chorus calling for easing, if not full repeal, of Dodd-Frank’s burdens. However, despite Dodd-Frank critic Donald Trump’s win in the 2016 presidential election, which kept anti-regulation Republicans in control of Congress, they are not optimistic this will happen soon.
Ballard Cassady Jr., president and chief executive of the Kentucky Bankers Association, said there aren’t enough votes in the U.S. Senate to repeal Dodd-Frank. What’s more likely, he said, is that either Trump will try to chip away at the rules through executive orders, or Republicans in the House and Senate could make changes through the budget reconciliation process.