Repeal of the Dodd-Frank bank regulation act was one of Donald Trump’s campaign promises. Businesses have hoped that bank credit would become easier with a more favorable bank regulatory environment, but I don’t see that happening. Instead, look for the bank regulatory bureaucracy to move very, very slowly.

The most talked-about parts of Dodd-Frank don’t impact business lending directly. These are consumer protection, regulation of systemically important institutions, and bank trading in securities for their own accounts.

As I speak with bankers about their business lending, their greatest concern is the rank-and-file bank examiner who looks at loan files and tells the bank that this loan or that loan stinks. The banks then have to hold more reserves against loan losses, taking an immediate hit to earnings, even if the loan is performing well right now. The next loan applicant is held to a higher standard so that the bank examiner doesn’t ding the bank again.

The judgments of thousands of bank examiners cannot be changed easily, not nearly as easily as leadership of regulatory agencies can be changed or laws can be passed. Regulators went on a hiring binge in the financial crisis. The Federal Reserve, just one of many regulatory agencies, boosted the number of bank examiners by 46 percent from 2008 through 2016, according to Bloomberg News. Figure in normal retirements of older examiners and half of today’s regulatory staff have probably learned their trade since the financial crisis. Their attitudes about banks and risk are unlikely to be changed by the Trump administration. The guidelines for bank capital can be specified precisely. The guidelines for a typical commercial loan cannot, because every business is unique, with different strengths and weaknesses. Good bankers learn about credit, and have an incentive to make good loans, not bad. Bank examiners have a strong incentive for no bank to fail on their watch. They don’t have any incentive to boost lending to growing businesses.

In this environment, businesses should double-check their assumptions about their bank relationship. For those that have a bank line now, the business owner or CFO should meet with the banker and ask two crucial questions:

• “If we have a bad year, how bad can we go before you cut our credit line?”
• “If we have a good year, will you be ready to extend additional credit to help us grow?”

I’ve stated the questions in general terms, but some pro forma projections of a bad year and a good year will help the discussion. And if your banker cannot give you at least a ballpark estimate, then you need to find another banker.

Those companies that are not currently borrowing from a bank should have a conversation with one or two bankers. “Would we be eligible for a loan if we saw a good opportunity? If not, by how much must our financial condition improve to be eligible?”

Access to credit for working capital and for growth is a major headache for many companies, especially small businesses. Despite campaign promises, political reality is far less positive than political rhetoric.