Marshall Lux, former chief risk officer for consumer businesses at JP Morgan, and now senior fellow at the Kennedy School at Harvard, believes that regulation which has been enacted in the wake of the financial crisis has disproportionately harmed smaller banks in the United States.
Lux has been researching the issue of how recent regulations, such as the Frank-Dodd financial reform bill, have affected banking in the US. This investigation comes at a time when lawmakers in Washington are considering introducing additional regulations to further control US banking.
Despite the fact that the market share for banks with less than $10 billion in assets has been declining since even before the introduction of Frank-Dodd, Lux has shown that since 2010, when Frank-Dodd came into effect, the market share decline for smaller banks had doubled. Between 2006 and mid-2010 the market share of small banks in the US shrunk by 6 percent, while from the introduction of Frank-Dodd in mid-2010 until now the reduction has been about 12 percent.
“What if Dodd-Frank created a too-small-to-succeed problem in addition to the too-big-to-fail problem?” said Mr Lux. “This research suggests it has.”