Increasing Compliance Costs Hit Financial Industry In Maine

Regulations in the financial services industry have steadily increased in number and extent over the past ten years. Since 2008 alone, 120 regulatory changes have been announced by 15 federal agencies for credit unions and a whopping 921 compliance changes for Banks.  This, according to a recent article from MaineBiz which highlights just how far-reaching the effects of these regulations are. Not surprisingly, the impetus behind much of these regulations is the recent mortgage and lending crisis and resulting economic recession. This, of course, led to the Dodd-Frank Wall Street Reform and Consumer Protection Act, one of the most comprehensive financial reform acts in history.

 Perhaps most concerning is the uncertainty surrounding the costs of regulations. One source notes that the FDIC is unsure of what compliance with these financial regulations actually costs the financial services industry. Here is what we know:  compliance costs account for 12% of total operating expenses ($50 billion) across the country’s banking industry. Maine is no exception to the trend. A regional survey in Maine reveals that compliance costs on average have increased nearly 19% since 2009.

 On the brighter side, much of the oversight under the new rules issued by the Consumer Financial Protection Bureau (the regulatory agency established under Dodd-Frank) only applies to banks and non-bank financial service providers with assets over $10 billion. Those with assets under $10 billion (which includes all such institutions in Maine) are regulated by separate authorities. However, as Chris Pinkham, Maine Bankers Association President warns, such rules can set a precedent that regulators find difficult to ignore.

Time will tell the full effect and costs of regulations on the financial industry, in and outside of Maine.

 

 

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