2019 Journal of Community Bank Case Studies

2019 COMMUNITY BANK CASE STUDY COMPETITION

Our findings suggest that the Dodd-Frank approach of ‘one size’ fits all was not appropriate and that while EGRRCPA legislation provides a more tailored approach to regulation, it is possible to ‘fall between two stools’. While the progress of the 2018 legislative changes are welcomed and are seen by Kish as a step in the right direction, the benefits to the bank have been and will be minimal. The direct benefits aside, Kish executives

suggest that there are indirect benefits, including greater regulatory transparency, progress towards a tailored approach to regulating community banks, and a more open and constructive dialogue between regulators and community banks. The report which follows will expand on these points and will highlight possible legislative changes that could be more advantageous for Kish.

Eastern Kentucky University Executive Summary

T he Dodd Frank Act was the most significant banking legislation since the Glass Steagall Act. It was meant to reign in the largest financial institutions but had an unintended victim: Community Banks. Since the passage of Dodd Frank, community banks across the nation have been burdened by regulation with compliance costs rising to 24% of net income and the loss of nearly a quarter of deposit share. Kentucky is fortunate to have leaders at the forefront of community banking issues. This project provided our team with the opportunity to work with the Kentucky Bankers Association and to conduct face-to-face interviews with the Kentucky Commissioner of Financial Institutions, Charles Vice, U.S. Representative Andy Barr (KY) and U.S. Senate Leader Mitch McConnell (KY). Representative Barr and Senate Leader McConnell met with our team members

to share the experience of working with the bipartisan EGRRCPA legislation. The bipartisan negotiation process lost some important provisions of the originally drafted version of Senate Bill 2155, but the final Bill still provided regulatory relief to community banks across the nation. Our bank partner for the case study was Kentucky Bank, based in Paris, KY. The Kentucky Bank management team opened their doors and their minds to us in exploring this important topic. Our regulatory burden assessment indicates that the greatest Dodd Frank regulatory burdens on the bank are TRID, HMDA and Customer Due Diligence. Kentucky Bank anticipates potential financial benefit from EGRRCPA provisions including simplified capital, small bank holding company threshold, qualified mortgage and the 18-month exam cycle. Kentucky Bank provided a Provisions Chart (Figure 2) that estimates

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