Yet, in the past year, at an additional cost of between $100,000 and $200,000, the bank has had to increase staff time and outside consulting hours significantly to interpret and implement new regulatory compliance.
There is a very real risk that banks smaller than Beverly Cooperative Bank — say, less than $100 million in assets — will not be able to absorb these costs, and therefore may be closed, or may be purchased by larger banks. Either way, the local community is the loser — either no bank at all, or a larger, less responsive bank.
Will Dodd-Frank be successful? My discussion with Beverly Cooperative executives reinforces something else Volcker said. He said that regulators are often outgunned. If senior executives at the big banks don’t set the tone and discipline and ethics that they require of their institutions, it’s unlikely that any set of regulations will succeed.
During the bubble, Beverly Cooperative executives had the integrity to run a responsible bank, and I suspect that they don’t require additional auditing to continue that practice. The big question is: What will it take to elicit best practices from the larger institutions of the industry?
Brian T. Watson is a regular Salem News columnist. Contact him at firstname.lastname@example.org.