Community bankers on Long Island and around the country are optimistic about changes the Trump administration and Congress have promised to laws that tightened supervision of the banking industry after the 2008 financial crisis.
The number of small, local banks has declined since the Great Recession, a change that advocates feel was intensified by the paperwork the increased oversight entails.
“There is a huge amount of paperwork,” said Douglas C. Manditch, chairman and chief executive officer at Islandia-based Empire National Bank and chair of the Independent Bankers Association of New York State. The bank has spent about 13 percent of its annual revenue on regulations and oversight requirements in the last three years, he said. Empire National had about $26 million in revenue in 2016.
“What we have to put our customers through is really difficult. It has gotten to the extreme,” he said. “Much of it is not necessary.” Empire National Bank has assets of $750 million.
The U.S. had 5,521 community banks as of Sept. 30, down more than 25 percent from 7,442 at the end of 2008, when the banking crisis was still in its early days, according to the Independent Community Bankers Association, an industry group.
The Federal Deposit Insurance Corp. has reported nearly 500 bank failures since 2009, most of them small banks. Others have merged to cut costs and stay in business, but many have struggled even as the economy has recovered.
“There are probably a lot of reasons why some of those banks failed, and certainly the economy in general hurt those banks,” said Michael N. Vittorio, president and chief executive of Glen Head-based First of Long Island, the parent company of First National Bank of Long Island, which has $3.5 billion in assets.
But industry groups and some other bankers blame increased regulation, including the Dodd-Frank bill passed by Congress in 2010.
“A great deal of this drop [in the number of community banks], perhaps 50 percent to 75 percent of this drop, is because of regulations,” Manditch said.
Last week, President Donald Trump signed an executive order directing the Treasury secretary to review Dodd-Frank and its thousands of regulations. Changes in the law would have to be made by Congress.
Dodd-Frank has created additional procedures and paperwork for all banks, but community banks have a harder time meeting the requirements because they have far smaller staffs than regional or national financial institutions, says Paul Merski, the ICBA’s chief economist.
“You can’t say which provision it is that’s causing you concern. It’s more like death by a thousand cuts,” said Tim Zimmerman, president of Standard Bank, a Pittsburgh-area community bank with nine branches. — with AP