On Thursday, February 10, 2011, Cozen O’Connor Public Strategies Principal Howard Schweitzer was a panelist at Capital Roundtable’s Masterclass, “Private Equity Investing in Regional & Community Banks — How Investors Can Thrive From the Surge in Consolidations.” Howard spoke on a panel regarding Dodd-Frank that was focused on the Consumer Financial Protection Bureau (CFPB). The panel also included the recently departed Minority Chief Counsel for the Senate Banking Committee, a consumer financial protection attorney, and an investment banker.
The panelists agreed that the CFPB is likely to decrease the profitability of regional and community banks and that uncertainty with respect to the CFPB’s future activity creates significant compliance and regulatory risk for financial institutions. Although the CFPB has limited supervisory authority over banks with assets of less than $10 billion, rules promulgated by the CFPB will still apply to these smaller banks. Several of the panelists highlighted the Durbin Amendment, which drastically reduces debit card interchange fees, as a prime example of a Dodd-Frank provision that may pose a significant risk to banks’ profitability.
Howard, the former Chief Operating Officer of the Troubled Asset Relief Program (TARP), pointed out the irony of Dodd-Frank creating significant regulatory uncertainty and potentially forcing small banks out of business, just a short time after TARP invested hundreds of billions of dollars to stabilize the banking sector and keep banks in business. He further noted that while Dodd-Frank was passed in light of banks being “too big to fail,” it may have created a segment of banks that are “too small to succeed.”
Cozen O’Connor Public Strategies will continue to monitor the CFPB as Treasury prepares to transfer the Bureau to the Federal Reserve on July 21, 2011. For more insight on the CFPB, visit http://www.copublicstrategies.com/Industries/Consumer-Financial-Protection-Board.