The Effects of Regulatory Compliance for Small Banks Around Crisis-Based Regulation

In this article I investigate the regulatory burden for small U.S. banks around major crisis‐based regulatory programs using measures of profit, cost, and productivity from 1991 to 2014. After the passage of the Federal Deposit Insurance Corporation Improvement Act, there is little evidence consistent with increased regulatory burden. After the passage of the USA PATRIOT Act, the percentage change in employees was positive, and average pay was higher for small banks. After the passage of the Dodd–Frank Act, five of six regime‐shift indicators were consistent with increased regulatory burden, with lower pretax return on assets, lower loans per employee, lower technology and fixed‐asset expenditures, and higher percentage change in employees and salaries‐to‐assets in panel regressions.