Small Banks, Like Many Businesses, Are Fighting Against Stifling Regulations

Date: February 28, 2017

An overzealous regulatory climate continues to hurt small businesses, but some relief might be in store for smaller banks.

Overreaching regulations continue to pain businesses, but relief could be in sight for smaller banks, according to Bloomberg

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The Dodd-Frank Act has cast a looming shadow over small banks and businesses since passing under the Obama administration in 2010. Added regulation costs attached to lending transactions “have made small business loans less profitable and lenders much harder to find,” Bloomberg reported.

In regards to the federal law, President Donald Trump promised his administration would be “cutting a lot” of the regulations and provisions surrounding Dodd-Frank, according to The Atlantic

“I have so many people, friends of mine, with nice businesses, they can’t borrow money, because the banks just won’t let them borrow because of the rules and regulations and Dodd-Frank,” Trump said.

Whatever changes are made to Dodd-Frank may not be enough to save small banks and businesses, though. Some problems, like mediocre economic growth and small businesses’ fear of borrowing after the 2008 financial crisis, have been around before Dodd-Frank came into play, Bloomberg reported.

In general, “it is important to look for every way we can to mitigate the regulatory burden” on smaller institutions, the Federal Reserve Chair Janet Yellen told the Senate Banking Committee on Feb. 14. She added that the Fed has already made efforts to reduce the regulatory burden on community banks and is open to doing more. 

It’s a pressing need: The number of community banks in the United States dropped from 7,442 at the end of 2008 to 5,521 as of Sep. 30, 2016, according to figures from the Federal Deposit Insurance Corp., the Associated Press reported. There have also been nearly 500 bank failures since 2009, the majority of them smaller institutions. 

These issues extend beyond the financial sector, too. There are fewer airlines, cable-TV providers and health insurers than there used to be,” according to Bloomberg. “The share of companies with fewer than 250 employees has slid steadily since the Great Recession.”

More small businesses now consider overreaching regulations to be one of their top concerns. NFIB’s 2016 Small Business Problems and Priorities report lists “unreasonable government regulations” as the second-most pressing issue to small business owners, rising from its fifth place spot back in 2012. 

Related:

Where Should Small Business Go for Loans?

NFIB to Legislators: Regulations Are Crushing Small Business

The State of Small Business Financing

Related Content: Analysis | State | National | Regulations | Regulations

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