The Impact of Dodd-Frank on Community Banks

52 Pages Posted: 13 Oct 2013

Date Written: May 15, 2013


The regulatory framework for financial institutions in the United States, including many provisions of The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), impose significant costs on community banks without providing benefits to consumers or the economy that justify those costs. The stated purpose of Dodd-Frank was to prevent another financial crisis by enhancing consumer protection and ending the era of "too big to fail." However, the application of Dodd-Frank to community banks is misplaced. Community banks did not cause the financial crisis. The relationship-banking business model and market forces protect the customers of community banks without the need for additional regulation. Dodd-Frank builds on decades of "one size fits all" regulation of financial institutions, an ill-conceived regulatory framework that puts community banks at a competitive disadvantage to their larger, more complex competitors. The imposition of regulatory burdens on community banks without attendant benefits ultimately harms both consumers and the economy by: (1) forcing community banks to consolidate or go out of business, furthering the concentration of assets in a small number of mega-financial institutions; and (2) encouraging standardization of financial products, leaving millions of vulnerable borrowers without meaningful access to credit. Neither of these outcomes will protect consumers, the financial system, or the recovery of the American economy.

Keywords: Dodd Frank, Dodd-Frank, community bank, banking regulation, too big to fail

JEL Classification: K23, G21

Suggested Citation

Marsh, Tanya D. and Norman, Joseph, The Impact of Dodd-Frank on Community Banks (May 15, 2013). Wake Forest Univ. Legal Studies Paper No. 2302392, Available at SSRN: or

Tanya D. Marsh (Contact Author)

Wake Forest Law School ( email )

P.O. Box 7206
Winston-Salem, NC 27109
United States

Joseph Norman

Independent ( email )

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