Journal of Regulatory Economics

, Volume 55, Issue 2, pp 214–236 | Cite as

Has Dodd–Frank affected bank expenses?

  • Thomas L. HoganEmail author
  • Scott Burns
Original Article


This paper examines the potential effects of the Dodd–Frank Act of 2010 on banks’ noninterest expenses. Using data on U.S. bank holding companies from 1995 through 2016, we test whether noninterest expenses increase following the passage of the Dodd–Frank Act or in relation to the number of banking regulations implemented after Dodd–Frank. We analyze subsamples of banks above and below $10 billion in total assets and consider total noninterest expenses, salaries, non-salary expenses, and specific subcategories of non-salary expenses: legal, consulting, auditing, and data processing. Non-salary expenses for both large and small banks show a one-time increase after Dodd–Frank, while salary expenses tend to increase with regulations. The results indicate that total noninterest expenses for the banking system are higher on average by more than $50 billion per year compared to before the Dodd–Frank Act.


Dodd–Frank Bank expenses Regulation Compliance Federal reserve 

JEL Classification

E58 G21 G28 



For helpful comments and suggestions, the authors thank Nicholas Cachanosky, Robert DeYoung, Joshua Hendrickson, Travis Hill, W. Douglas McMillin, Neil R. Meredith, two anonymous reviewers, and session participants at the Southern Economic Association annual conference and the Research Seminar on Financial Markets Regulation by the Institute of Humane Studies and the Mercatus Center.


  1. Al-Ubaydli, O., & McLaughlin, P. A. (2017). RegData: A numerical database on industry-specific regulations for all United States industries and federal regulations, 1997–2012. Regulation and Governance, 11, 109–123.CrossRefGoogle Scholar
  2. American Bankers Association. (2012). Dodd–Frank and community banks: Your guide to 12 critical issues. Washington, DC: American Bankers Association.Google Scholar
  3. Bender, M. C., & Paletta, D. (2017, February 3). Donald trump plans to undo Dodd–Frank Law, fiduciary rule: White House adviser Gary Cohn says banks burdened by rules added after financial crisis. The Wall Street Journal.Google Scholar
  4. Board of Governors. (2013). Dodd–Frank Act stress test 2013: supervisory stress test methodology and results. Washington DC: Federal Reserve System.Google Scholar
  5. Calabria, M. A. (2009). Did deregulation cause the financial crisis? Cato Policy Report 31(4), 1–8. Washington D.C.: The Cato Institute.Google Scholar
  6. Conference of State Bank Supervisors. (2014). Community banking in the 21st century: Opportunities, challenges, and perspectives. Federal Reserve and the Conference of State Bank Supervisors.Google Scholar
  7. Department of the Treasury. (2017). The Dodd–Frank act: Reforming wall street and protecting main street. Washington, DC: U.S. Department of the Treasury. January 2017.Google Scholar
  8. DeYoung, R., Hunter, W. C., & Udell, G. F. (2004). The past, present, and probable future for community banks. Journal of Financial Services Research, 25(2–3), 85–133.CrossRefGoogle Scholar
  9. Federal Deposit Insurance Corporation. (2012). FDIC community banking study. Washington DC: Federal Deposit Insurance Corporation.Google Scholar
  10. Federal Reserve Bank of St. Louis. (2018). Compliance costs, economies of scale and compliance performance: Evidence from a survey of community banks. St. Louis.Google Scholar
  11. Government Accountability Office. (2015). Dodd–Frank regulations: Impacts on community banks, credit unions and systemically important institutions. Washington DC: Government Accountability Office.Google Scholar
  12. Grant, W. (2012). Testimony before the subcommittee on financial institutions and consumer credit of the committee on financial services United States house of representatives. Congressional Testimony. American Bankers Association.Google Scholar
  13. Hartley, J. (2015, March 13). Fed Should stop the stress test guessing game. American Banker.Google Scholar
  14. LaCarpa, L. T. (2015, June 11). Banks are not getting much use out of U.S. stress tests—Survey. Reuters.Google Scholar
  15. LaCarpa, L. T., & Henry, D. (2013, September 12). JPMorgan to spend $4 billion on compliance and risk controls: WSJ. Reuters.Google Scholar
  16. Lux, M., & Greene, R. (2015, Feburary). The state and fate of community banking. M-RCBG Associate Working Paper Series No. 37.Google Scholar
  17. Lux, M., & Greene, R. (2016, April 14). Dodd–Frank is hurting community banks. The New York Times. Accessed 14 March 2019.
  18. McCord, R., & Prescott, E. S. (2014). The financial crisis, the collapse of the banking industry, and changes in the size and distribution of banks. Economic Quarterly, 100(1), 23–50.Google Scholar
  19. McLaughlin, P. & Greene, R. (2013, July 19) Did deregulation cause the financial crisis? Examining a common justification for Dodd–Frank. Accessed 14 March 2019.
  20. McLaughlin, P., Reese, C., & Sherouse, O. (2016, February 4). Dodd–Frank and the federal reserve’s regulations. Accessed 14 March 2019.
  21. McLaughlin, P., & Sherouse, O. (2015, July 20). The Dodd–Frank wall street reform and consumer protection act may be the biggest law ever. Accessed 14 March 2019.
  22. Patel, S. S. (2014, July 14). Citi will have almost 30,000 employees in compliance by year-end. MarketWatch.Google Scholar
  23. Peirce, H., & Broughel, J. (2012). Dodd–Frank: What it does and why it’s flawed. Arlington, VA: Mercatus Center.Google Scholar
  24. Peirce, H., Robinson, I., & Stratmann, T. (2014). How are small banks faring under Dodd–Frank? Mercatus Working Paper.Google Scholar
  25. Rubinstein, S. (2012). Putting banks to the (stress) test. Region Focus, 16(4), 6–8.Google Scholar
  26. Shane, S. (2013, September 13). Collateral damage for small business credit. Bloomberg Businessweek.Google Scholar
  27. Sterngold, J. (2015, March 9). Fed broadens scope of stress tests. The Wall Street Journal.Google Scholar
  28. Tracy, R. (2016, June 28). Stress test Inc.: Billions of dollars, bank consultants to manage other consultants. The Wall Street Journal.Google Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Baker Institute for Public PolicyRice UniversityHoustonUSA
  2. 2.Ursinus CollegeCollegevilleUSA

Personalised recommendations