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Dodd-Frank Credit Rating Regs Complicate Investment Analysis, Cut into Yield

August 20, 2012
Bank Safety & Soundness Advisor

Prior to the recession, too many banks were far too reliant on credit rating agency ratings when making decisions about investments. That, at least, is the idea behind the provision in Dodd-Frank that now prohibits banks from making investment decisions armed with little more than an S&P rating and a hunch. Dodd-Frank requirements for independent analysis will be hard for community bankers to manage on their own, says Richard Berg, CEO of Performance Trust, Chicago. “The standard is very high and fairly arbitrary [to vet investments],” he says.

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