Dodd-Frank costs reach $36 billion in sixth year

This article is by Ayesha Javed of Bloomberg Brief. It appeared first in Bloomberg Brief | Financial Regulation & Risk.

The sixth year of the Dodd-Frank Wall Street Reform and Consumer Protection Act was the most expensive in the law’s history as the costs of implementing the rules soared to an all-time high, according to from center-right policy institute the research American Action Forum.

In the past 12 months, costs resulting from rules implemented under the Dodd-Frank Act — which reached its sixth anniversary on July 21 — totaled $10.4 billion, the highest amount in a year since the regulation’s inception, according to the AAF.

That brought the total costs of the rule since 2010 to $36 billion, according AAF data.

The largest sources of the costs were measures for margin and capital requirements for swap entities — costing $5.2 billion in the past year — and margin requirements for uncleared swaps, costing a further $2.1 billion. Pay ratio disclosures brought with them $1.8 billion in costs, while home mortgage disclosures added a $1.3 billion burden in the last year.

The research also showed that over the past six years, Dodd-Frank has resulted in a burden of 73 million paperwork hours, up from 61 million last year, the AAF said.

The largest rules that are still under the “proposed” category could add a further $3.4 billion in costs, the AAF estimated. The five largest include requirements for systemically important financial institutions, proposed by the Federal Reserve, which could add $1.5 billion in costs for financial institutions. The Securities and Exchange Commission’s “Disclosure of Payments by Resource Extraction Issuers” rule, which requires companies to provide information on payments to foreign governments and corporations about commercial development of oil, natural gas or minerals, was expected to be completed in June but has missed its deadline. It is predicted to cost firms $1.3 billion, according to the American Action Forum.

The Consumer Financial Protection Bureau’s arbitration agreements measure, the SEC’s proposed rules for security-based swap repositories and their recordkeeping and reporting, could produce a further $587.8 billion of additional costs, most of which are expected to come to fruition in the next year, according to the AAF report.

“As time passes, the law becomes more expensive as regulatory agencies like CFPB and [Federal Housing Finance Agency] grow with the mission to implement burdensome rules. Meanwhile, small financial services firms continue to struggle as the law restricts the availability of financial products,” analysts Sam Batkins and Dan Goldbeck said in the report. “With dozens of regulations still left to implement, one can only expect the costs to continue to rise.”

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