Wisconsin Bankers Association: Wisconsin bankers brace for regulatory overhaul

For more information, contact Jason Busch, 608/441-1237, jbusch@wisbank.com

Warn that public will see higher costs and few, if any, benefits

(MADISON) Wisconsin’s top bank leaders warn that the biggest rewrite of banking laws since the Great Depression will raise the cost of financial services for the public without addressing the root causes of the financial crisis. Bankers completing the Wisconsin Bankers Association (WBA) semiannual Bank CEO Economic Conditions Survey also report that demand for commercial and other benchmark loan categories remains weak throughout the state.

When asked how the soon-to-be enacted federal financial regulatory reform bill – commonly referred to as the Dodd-Frank Bill – will affect their bank, the 114 survey respondents overwhelmingly said it will increase compliance costs, limit revenue opportunities and may force them to charge for services that are currently free.

Bankers also expressed concern that the increased capital requirements in Dodd-Frank may reduce lending and slow the economic recovery.

Bankers further take issue with claims that consumers will be better protected as a result of Dodd-Frank. According to one banker, “[The] reform should have been directed at those who caused … the problems.” Another said Dodd-Frank will “generate a negative impact on both the bank and our customers.”

In stark contrast to how President Obama and federal lawmakers sold the regulatory reform package, Wisconsin bankers believe “Main Street” community banks will be hit harder by Dodd-Frank than the mega “Wall Street” firms. It will “place us on the endangered industry list,” a banker warned. Another said “larger organizations are better able to absorb the costs of compliance.”

The U.S. Senate is expected to take action on Dodd-Frank in the next two weeks. The House of Representatives approved the bill on June 30.

On the Wisconsin economy, 96 percent of bankers rated current state conditions as either fair (77 percent) or poor (19 percent), compared to 95 percent six months ago. In the next six months, 78 percent of respondents predict that economic conditions will stay the same, while 14 percent say the economy will grow and 8 percent say it will weaken.

A majority of bankers (56 percent) believe that the Wisconsin economy has hit bottom and is now beginning to improve, while 44 percent said the economy is still weakening. That is an improvement from a year ago when 70 percent of respondents said the Wisconsin economy had not hit bottom and was still weakening.

Ninety-five percent rate current demand for commercial loans in Wisconsin as either poor (53 percent) or fair (42 percent), while 5 percent rated demand as good. No one rated demand as excellent.

Demand for residential mortgages wasn’t much stronger with 17 percent rating it good, 58 percent rating it fair and 25 percent rating it poor. Seventy-four percent said that the expiration of the homebuyer tax credits is slowing home sales in the market or markets they serve.

Despite predictions that interest rates will remain low through the end of the year, bankers believe commercial and residential mortgage loan demand will remain weak.

“Bankers say commercial lending demand remains low because businesses are uncertain about the strength of the economic recovery,” said Kurt R. Bauer, WBA president/CEO. He said that bankers and their business customers are also concerned about how local, state and the federal governments will address budget deficits. “For all businesses, uncertainty about the economy or about potential tax increases leads to caution, which usually stalls job creation and economic growth.”