Banking reforms may put costs on customers
Industry experts say banks will be able to adjust to all the new rules being heaped on them by Congress -- partly by raising fees on customers.
"The industry kind of missed a bullet. They could have gotten much stricter regulations," said Richard Bove, a veteran banking analyst at Rochdale Securities in Stamford, Conn.
"If you really look at this bill, there's a lot of heat but no fire," said Matthew Schultheis of Boenning & Scattergood in West Conshohocken.
Bove called the bill an "unnecessary overlay of regulation" and predicts banks will pass its costs onto consumers and business customers.
"You might have to pay $12 or $15 a month to maintain your bank account," he said. "Whereas before, all you heard about was free checking or waiving fees. Now that will be gone."
Banks in Western Pennsylvania were reluctant Friday to discuss the bill, which is expected to pass Congress next week and be signed by President Obama by July 4.
PNC Financial Services Group will be mildly affected by some provisions, said analysts. Bank of New York Mellon will hardly be affected at all. Both banks employ thousands in Pittsburgh.
"We are reviewing the legislation and will make the appropriate changes to comply with it," said PNC spokesman Fred Solomon. Until PNC sees the final regulations, "it would be inappropriate to speculate as to how we would be affected."
Spokesmen for Citizens Bank and Huntington Bancshares made similar comments.
BNY Mellon could mine business opportunities from the mound of new regulations, said Bove. The new Consumer Financial Protection Bureau, for instance, will require myriad reporting requirements on banks that may not be able to do all the work in-house.
"Banks will have to outsource that to someone, and BNY Mellon will get a good portion of that business," said Bove.
"BNY Mellon looks forward to working with the rest of the industry to implement the reforms," said bank spokesman Ron Gruendl.
One new rule, named after former Federal Reserve Chairman Paul Volcker, will limit banks' investments in private-equity and hedge funds. Other rules will require some banks to reorganize their capital structures, which could mean selling stock.
Another section of the law requires banks to separate trading in derivatives -- arcane financial instruments blamed for fanning the financial crisis -- into separate subsidiaries.
"If you stay away from high-risk activity, you're going to do just fine as a financial institution," said Sen. Bob Casey Jr., D-Scranton. "But gone are the days when we're just going to allow a handful of people or institutions on Wall Street to do whatever they want and leave the rest of the American people to pay for their mistakes."
Smaller banks are less affected by rules governing more sophisticated activities, such as hedge funds and derivatives. Smaller banks, or those with less than $15 billion in assets, were given a break on certain rules about capital.
Congress "recognizes the difference between Main Street community banks and Wall Street by ensuring megabanks pay their fair share for the risk they pose to the FDIC deposit insurance fund and ultimately, our entire financial system," said the Independent Community Bankers of America in a statement.
The bill affects the insurance industry, currently state-regulated, by creating a Federal Insurance Office.
"Our initial review suggests that the final legislation likely will not unduly harm life insurers or our customers," said Jack Dolan, spokesman for the American Council of Life Insurers, which represents more than 300 life insurers.
Another bill section lets the Federal Reserve limit "swipe" fees that merchants pay debit-card issuers and are included in prices that consumers pay.
"We would be in favor of anything limiting swipe fees," said Ross DiBono, executive director of the Pennsylvania Gasoline Retailers Association & Allied Trades Inc.
"But I don't think the fees are a real big deal because I don't get any complaints from my members," said DiBono, whose group represents about 600 distributors and franchisees of various brands.