Cost of Financial Regulation Passed along to U.S. Businesses, Study Finds

More than 75% of American companies are finding that it’s “harder for them to access the financial services they need” in the wake of increased federal financial regulation. That’s according to a new study by the U.S. Chamber of Commerce, who surveyed “more than 300 corporate financial professionals” from “companies of all sizes” about their regulatory experiences.

The Chamber of Commerce found that regulation like Dodd-Frank is directly affecting the activities of the businesses they surveyed, and argue that the costs of regulation are increasingly being passed on to some consumers and employees. Specifically, the Chamber found the following among those surveyed:

• 79% say their business has been affected by financial regulatory changes
• 76% believe regulations will not help their company over the next several years
• 50% say increased bank capital charges have increased their costs
• 43% say maintaining cash flow and liquidity is a chief concern
• 29% have increased prices for consumers
• 19% have delayed or cancelled planned investments

The Chamber doesn’t propose any specific solutions in the study, but asserts that “current financial regulations are making it hard for companies to lift the American economy.” The main issue raised is the problems that come with managing cash flow and liquidity – companies tell the Chamber that current regulations have made things more challenging for them, and that things could get worse if more rules are passed.

The study also points to what the Chamber calls the “trickle-down impact of regulatory overreach on customers.” This impact is said to be particularly damaging on small businesses with less cash on hand. Essentially, companies tell the Chamber that if they have a hard time accessing credit and raising short-term capital, they’ll be less likely to invest in ways that help the economy grow. If things are made easier on businesses, then they’ll help everyone else. The Chamber concludes that “while many of these reforms have improved the resilience of our financial system, a number of policy responses have gone too far and are negatively influencing Main Street companies and their customers.”

insideARM Perspective

The Chamber says that they’re “committed to advancing an agenda that promotes well-functioning and strong capital markets so that American businesses have the tools and resources necessary to drive economic growth.” They argue in this study that fewer regulations would help businesses reach that goal. That said, it seems unlikely that either Congress or anyone at the regulatory agencies will be swayed much by their argument.