Chapter 131: The Implications of Regulation in the Community Banking Sector: Risk and Competition

This chapter examines the relationship between financial performance, regulatory reform, and management of community banks. The consequences of the Sarbanes–Oxley Act (SOX) and Dodd–Frank Act (DFA) regulations are observed. Risk management responses to regulatory reforms, as observed in the loan loss provision, are examined in relation to these reforms. We also observe the consequences of compliance costs on product offerings and competitive condition. Empirical methods and results provided here show that sustained operations for community banks will require a commitment to developing management expertise that observes the consequences of regulatory objectives at the firm level.