Cumulative Weight of New Rules on Credit: The Evidence

Published August 18, 2011

Fast Facts from The Financial Services Roundtable

  • “Because banks believe that Dodd-Frank will probably hurt their bottom line, they’re already working on a range of offsets. These initiatives will likely take the form of additional charges for products and services that are currently now either free or at a lower cost for the consumer.”—Standard & Poor’s Report, “What Financial Reform Could Cost The Largest U.S. Banks,” November 2010
  • “Failure to consider and balance the combined impact of all of the changes will have real consequences to the extent that constraints on liquidity translate into constraints on bank lending and the availability of credit within the economy.”— John Walsh, Acting Comptroller of the Currency, Office of the Comptroller of the Currency, Testimony at the House Financial Services Hearing: “Financial Regulatory Reform: The International Context,” June 2011
  • “Economic output is mainly affected by an increase in bank lending spreads as banks pass a rise in bank funding costs, due to higher capital requirements, to their customers.”—Organisation for Economic Co-Operaration and Development, “Macroeconomic Impact of Basel III,” February 2011
  • “This, and a variety of other changes in funding costs, would lead to an increase –in bank lending rates of about 193 basis points by 2014.”—Institute for International Finance, Interim Report on the Cumulative Impact on the Global Economy of Proposed Changes in the Banking Regulatory Framework, June 2010
  • “In short the impact of Dodd-Frank looks similar to a roughly 100 basis point rise in borrowing costs.”—Dr. Douglas Holtz-Eakin, President, American Action Forum, Testimony at the House Financial Services Hearing: “The Costs of Implementing the Dodd-Frank Act: Budgetary and Economic,” March 30, 2011
  • “The uncertainty created by the Act is potentially toxic to any financial services start-up, in that it affects the ability of small and early stage companies to secure necessary capital.”—Mr. John M. Schaible, Chairman, Atlas Federal Holdings, House Financial Services Hearing: “The Effect of Dodd-Frank on Small Financial Institutions and Small Businesses,” March 2, 2011
  • “High dependency on banks of small and medium sized businesses, which typically create 70% of new jobs, presents another key issue.”—Institute for International Finance, Interim Report on the Cumulative Impact on the Global Economy of Proposed Changes in the Banking Regulatory Framework, June 2010
  • “According to our analysis and research, banks and credit unions will pass on much of the $33.4-$38.6 billion reduction in interchange fees to consumers and small businesses in the form of higher fees or reduced services during the 24-month period following the implementation of the regulations.”—David S. Evans, Robert E. Litan, Richard Schmalensee, “Economic Analysis of the Effects of the Federal Reserve Board’s Proposed Debit Card Interchange Fee Regulations on Consumers and Small Businesses,” February 2011
  • “Efforts to regulate credit card networks in other countries have not produced net benefits, even though they may have benefited merchants at the expense of some consumers and banks.”—Todd Zywicki, Mercatus Center, “The Economics of Payment Card Interchange Fees and the Limits of Regulation,” June 2010
  • “In the study sample, estimated direct costs would increase by approximately 75% to 195% for these investors.”—Oliver Wyman, Assessment of the impact of the Department of Labor’s proposed “fiduciary” definition rule on IRA consumers, April 2011

 The Financial Services Roundtable is made up of members from the banking, securities, investment, and insurance industries.