WASHINGTON – The Dodd-Frank Act is a burden on community banks and credit unions but regulators are struggling to quantify the costs, according to a report released Wednesday by the Government Accountability Office.

The GAO's annual report, which looks at Dodd-Frank rules expected to have an economic impact of at least $100 million annually, concluded that the 2010 reform legislation is hitting financial institutions' bottom lines, in the form of higher expenses and forgone revenues. But it's still too early to say exactly how much, the agency said.

"The full impact of the Dodd-Frank Act remains uncertain because many of its rules have yet to be implemented and insufficient time has passed to evaluate others," the GAO said. "Regulators told us that it is still too early to assess the full impact of Dodd-Frank Act rulemakings on community banks and credit unions, and while they have heard concerns about the increase in compliance burden, they have not been able to quantify compliance costs."

Community banks, credit unions and trade groups reported an increased compliance burden from certain rules in Dodd-Frank, the GAO said. Those surveyed especially noted continued fears about the Qualified Mortgage rule that took effect in January 2014.

"This included increases in staff, training, and time allocation for regulatory compliance and updates to compliance systems," the GAO said. "Some of these industry officials also reported a decline in specific business activities, such as loans that are not qualified mortgages, due to fear of litigation or not being able to sell those loans to secondary markets."

Still, the GAO urged caution in noting that there were "moderate to minimal initial reductions in" credit availability based on survey results and that regulatory data thus far has "not confirmed a negative impact on mortgage lending."

Trade groups seized on the report as evidence of the need for further regulatory relief from Congress.

"Today's GAO report confirms that Dodd-Frank regulations have increased compliance burdens on credit unions," Dan Berger, president and chief executive of the National Association of Federal Credit Unions, said in a press release. "Unfortunately, the methodology of the study, and the GAO acknowledges this in its report, fails to capture the full impact of these crushing regulatory burdens."

The National Credit Union Administration, which was the only federal financial regulator to have a comment letter attached in the report, said it concurred with the results but would have liked to see more detailed analysis that recognizes the difference between credit unions and banks.

"The appropriate indicators to use in assessing the effects of the Dodd-Frank Act may be different for very small institutions – where most of the credit unions are clustered – than they are for larger institutions," said the NCUA's Executive Director Mark Treichel, in a response letter. "Using a set of indicators better-calibrated to the business models may be more helpful in assessing the effects of the Dodd-Frank Act."

In responding to the NCUA, the GAO acknowledged that its indicators are "imperfect" but "we maintain that the indicators we developed are reasonable."

"Specifically, as we noted in the report, these indicators developed for various sizes of credit unions do not reflect the experience of every individual credit union," the GAO said. "We also stated in the report that while we presented similar indicators for banks and credit unions, comparisons between the two types of institutions may not be appropriate and that certain indicators may be more relevant than others for each type of institution."

The GAO also updated some of its indicators for key risk characteristics of large bank holding companies and their interconnectedness, largely finding some improving trends in recent years.

"Although changes in the indicators are not evidence of causal links to the act's provisions, some indicators suggest companies' leverage generally decreased and liquidity generally improved since the act's passage," the GAO said.

The GAO's updated regression analysis also indicated that Dodd-Frank "had little effect" on the funding costs of such companies and might be tied to improvements "in some measures of their safety and soundness."

The GAO is required to perform an annual study of the Dodd-Frank Act that looks at how the federal regulators implemented the rules and their coordinated efforts; the impact on community banks and credit unions; and the impact on financial market stability. The latest report looked at 26 rules in Dodd-Frank that took effect during the 12 months beginning in July 2014. The GAO also looked at 9 Dodd-Frank rules effective as of October in terms of their impact on community banks and credit unions.

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