“The full impact of the Dodd-Frank Act remains uncertain because many of its rules have yet to be implemented and insufficient time has passed to evaluate others,” the GAO said.
“Regulators told us that it is still too early to assess the full impact of Dodd-Frank Act rulemakings on community banks and credit unions, and while they have heard concerns about the increase in compliance burden, they have not been able to quantify compliance costs.”
Particular rules in Dodd-Frank created an increased compliance burden, especially in smaller lending institutions. Fears about loans that are not qualified mortgages have led to reduced loan activities lest the lender face litigation or the inability to sell those loans to secondary markets.
While the GAO acknowledged there were some initial contractions of credit availability, trade groups see this as the need for more regulatory relief from Congress. “Today’s GAO report confirms that Dodd-Frank regulations have increased compliance burdens on credit unions,” Dan Berger, president and chief executive of the National Association of Federal Credit Unions, said.
Meanwhile, the National Credit Union Administration (NCUA), the only federal financial regulator to leave a comment, said it would like to see the differences between banks and credit unions in a more detailed analysis.
“The appropriate indicators to use in assessing the effects of the Dodd-Frank Act may be different for very small institutions – where most of the credit unions are clustered – than they are for larger institutions,” said the NCUA’s Executive Director Mark Treichel, in a response letter. “Using a set of indicators better-calibrated to the business models may be more helpful in assessing the effects of the Dodd-Frank Act.”
The GAO, noting that the indicators they developed were reasonable, stated, “While we presented similar indicators for banks and credit unions, comparisons between the two types of institutions may not be appropriate and that certain indicators may be more relevant than others for each type of institution.”
The GAO is required to present an annual report on the effects of the Dodd-Frank Act on community banks and credit unions, the impact on financial market stability, and how federal regulators implemented the rules. ##
