2019 Journal of Community Bank Case Studies

Juniata College

FIRST PLACE:

banks of a similar size to Kish, and therefore knows and advises on the type of issues that Kish encounters. Another firm that Kish uses is CAPCO which provides similar consulting services. This is also an important resource for Kish, as Kish’s size precludes it from having the breadth of in-house expertise that is available to the larger banks. The last service that Kish outsources is post-closing data review, related to HMDA. Due to the significant penalty of reporting HMDA information inaccurately, Kish must engage in significant file review for HMDA compliance. As Kish continues to grow, the bank plans to hire additional regulatory compliance personnel to meet the added burdens that accompany an increase in asset size above the $1 billion mark. The bank estimates that the direct increase in the cost of regulatory compliance, following Dodd-Frank, is in the region of $80,000 per year. However, this does not include the extra personnel hours required to complete the more detailed call reports, or the time which senior management spends on oversight of regulatory issues. Other Resource Implications In addition to the more onerous regulations outlined above, the overall requirements imposed by the regulations diminished the ability of management to focus on its core business, serving its customers. According to Mr. Bill Hayes, the more burdensome reporting and compliance requirements meant that Kish was not directing it resources to benefit economic activities, which would enhance the communities in which it operates. Additionally,

Kish was not directing it resources to benefit economic activities, which would enhance the communities in which it operates.

management did not see the regulations as adding value for their customers or providing them with additional protections. Kish was simply not ‘too big to fail’ requiring the kind of oversight that Dodd-Frank imposed, nor was it engaged in activities like the unregulated mortgage brokers that operated pre Dodd- Frank. This view concurs with the perspective shared by Kahn who stated that community banks pose little systemic risk to the US’s financial system. Indeed, the general feeling is that the reaction to the 2008 financial crisis and the enactment of the legislation significantly impacted the speed of the economic recovery. By interfering with the banking industry, Mr. Bill Hayes suggests that the regulations constrained Kish’s ability to respond to a normalized recovery by curtailing the provision of funding and liquidity. While this may not have been the intent of the legislation, it also highlights the issues at play between the legislation itself and the way in which laws are interpreted into rule making and

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