2019 Journal of Community Bank Case Studies

Juniata College

FIRST PLACE:

for compliance violation errors. This is more likely to negatively impact smaller banks, such as Kish, due to the increase percentage of data points for a lower number of loans. The one positive from the additional field requirement is that it allows for more transparency between banks—the information is publicly available thus facilitating data analysis on competitors and providing information on their product offering. Capital Requirements After the passage of Dodd-Frank, all banks undertaking transactions beyond the most basic banking activities were required to maintain a minimum risk-based capital ratio of 10% (regulatory capital divided by risk weighted assets) and a minimum leverage ratio (regulatory capital divided by average total assets) of 5%. Furthermore, what constituted ‘capital’ was more narrowly defined in the legislation (CRS). While the purpose of these requirements was to ensure that banks were liquid enough to cover unexpected losses and liabilities, this meant that Kish had to set aside the necessary amount of assets as a buffer for these potential losses and liabilities or reduce its loan book. The consequences of either option meant that Kish had less money available to circulate in the form of loans, which was magnified and thus impacted exponentially on the communities it serves. This reduced Kish’s ability to maximize profit from lending. As the majority of the bank’s shareholders are local to the areas it serves, this had further ramifications for these communities. Furthermore, at the state level,

Pennsylvanian banks are required to pay a capital tax when they increase their capital level. This meant that Kish’s expenses increased when more capital was reserved. When the tax burden increased due to the introduction of the new ratios, Kish experienced reduced earnings which impacted the bank, its shareholders, and the ability to provide loans to the wider community. Call Report Requirement Under Dodd-Frank, Kish was also required to submit additional information in its call reports each quarter. According to the FDIC, institutions submit call report data to the regulatory agencies each quarter for monitoring the condition, performance, and risk profile

When the tax burden increased due to the introduction of the new ratios, Kish experienced reduced earnings which impacted the bank, its shareholders, and the ability to provide loans to the wider community.

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