Thirty-three percent of banks with assets under $50 million would become unprofitable if they were to add just two extra compliance employees, according to a paper released last week by the Federal Reserve Bank of Minneapolis. Even adding just half of a full-time equivalent employee would make 6% of under-$50M banks unprofitable.
The researchers sought to quantify the cost of increased regulation on community banks by modeling the impact of new regulatory costs as the hiring of additional staff, resulting in higher total compensation and lower profitability. The researchers then analyzed the changes in the distribution of community bank profitability.
They also developed a downloadable calculator into which banks can input their own asset size, full-time employee head count, and compensation levels to assess their own compliance burden.
Download the calculator.