Impact of Dodd-Frank on Banks

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The Impact of the Dodd–Frank Wall Street Reform and Consumer Protection Act on financial institutions JULY 20, 2012. Introduction The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in July 2010 sending shockwaves through an already panicked financial services industry. The Act was passed to make sure there wasn’t a repeat of the 2008 financial crisis. The Act created a new set of rules with emphasis on transparency and accountability. Another goal of the Act was to eliminate the reliance on big banks by making sure strict financial guidelines are followed to bring some sanity into the financial system. The Act placed limitations on some of the activities of large banking institutions and detailed the powers of the Federal Deposit Insurance Corporation (FDIC) in cases of bank failures. The Dodd-Frank Act placed emphasis on reducing the possibility of future bankruptcies and sought to limit the exposure of large banks to risky trading activities. Analysis The Dodd-Frank Wall Street Reform and Consumer Protection Act was designed to offer a greater level of oversight to discourage high-risk behavior and avoid a repeat of the recent turmoil experienced in the financial markets. The act has had a significant impact on financial institutions, ranging from a possible decline in profit margins to increased staffing to address regulatory compliance concerns. Lending decisions are under greater scrutiny, dictating that institutions practice greater discretion and decreasing capital available to potential borrowers. The Federal Reserve’s debit-card interchange fee rule, born out of the Durbin Amendment of the Dodd-Frank Reform Act, stipulates that certain debit-card issuers can no longer charge merchants as much as they once did for customers’ debit-card transactions. The interchange fee cap was intended to lower costs for merchants who will
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