Editor, The Commercial:
In 2010, the Dodd-Frank Act was enacted as a response to the financial crisis. Its intent was to make changes to the financial regulation system. Small banks have a much harder time meeting these new regulation requirements than larger banks.
In a survey done by the Mercatus Center, 90 percent of responding community banks faced increased compliance costs because of the Dodd-Frank Act. Also, many community banks had to increase their staff to handle the regulations, as well as discontinued certain products, because they would be too costly to maintain.
The Dodd-Frank Act has forced small banks to grow much quicker than the normal market would allow. Many small banks have had to either sell or merge to grow quickly enough to meet the new compliance costs, leading to a continued decrease in the number of small banks.
Over roughly a 10-year period, the number of community banks has declined by 43 percent nationwide and by only 35 percent in Arkansas. Even though all states are suffering from a declining rate of community banks, Arkansas tends to have more community banks keep their doors open.
Independent reporting for Pine Bluff & Jefferson County since 1879.
This could be attributed to the fact that Arkansas is a very rural state. For an example, Oklahoma is considered by the U.S. Census Bureau to be as rural as Arkansas. In Oklahoma, the rate of decline is 39 percent. Perhaps community banks have less competition from big banks in rural areas than in more urban areas, allowing them to survive.
Hannah James
Monticello
Hannah James is a student research fellow at the Arkansas Center for Research in Economics at the University of Central Arkansas where she’s doing research on Arkansas community banks.