We have not seen significant analytical consideration of one of the central themes underlying the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which seeks to limit risk in the banking system by imposing escalating regulatory requirements on banking organizations based on their size.

This “growth tax” is imposed not only on large banks that may be deemed systemically important, but also on community banking organizations. As a result, all banks must now consider the regulatory implications of growing larger, either organically or through acquisitions, against the revenue growth and operational efficiencies that growth often seeks to achieve. Indeed, investors in the equity and debt of such institutions are sure to do so when making their investment and pricing decisions.

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