Two new regulations set to be implemented under Dodd-Frank will add a whopping $6.7 billion to the Wall Street regulation bill’s cost burden, a report released Tuesday by Washington-based think tank American Action Forum says.
The margin and capital requirements for covered swap entities — a rule issued by five federal agencies, including the Federal Reserve, Comptroller of the Currency, Federal Deposit Insurance Corporation, Farm Credit Administration and Federal Housing Finance Agency in October — will cost an estimated $5.2 billion, the priciest rule since the legislation was implemented in 2010.
The agencies say the new regulation will “help ensure the safety and soundness of swap trading in light of the risk to the financial system associated with non-cleared swaps activity.
The study found the margin rule would have the biggest impact on New York, California, Illinois and Massachusetts.
The Federal Reserve also proposed a rule in late October requiring banks holding over $50 billion in assets to maintain a minimum amount of unsecured long-term debt. The regulation will cost an estimated $1.5 billion, according to the study.
“The text does not quantify a benefit, but notes that prior to Dodd-Frank, the odds of major financial crisis were between 3.5 percent and 5.2 percent,” AAF policy directors Meghan Milloy and Sam Batkins said in their findings. “Presumably, this rule alone won’t significantly lower those odds, only in concert with other rules addressing risk will Dodd-Frank reduce the chances of another crisis.”
The cost of Dodd-Frank’s implementation has increased from $24 billion to $29.3 billion since July, and AAF projects costs will continue to go up as more measures are finalized.
“To put the paperwork in perspective, it would take 36,437 employees working full-time to complete a year of the law’s figurative ‘red tape,'” they wrote. “The margin rule is evidence that, even after five years, the slow crawl of Dodd-Frank regulation will continue to pile up significant economic burdens for the financial system and consumers.”
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