Washington, D.C. (June 10, 2024) — As community banks and small businesses face increasingly burdensome and complex federal regulations, the Independent Community Bankers of America (ICBA) today released findings from a new study on how regulations threaten to restrict small-business lending. ICBA today shared these new findings in a letter to the federal banking agencies and Consumer Financial Protection Bureau.

“While community banks are the nation’s leading small-business lenders, ICBA’s new study on the unintended consequences of excessive regulation spotlights how new rules burden community banks and harm small businesses,” ICBA President and CEO Rebeca Romero Rainey said. “We strongly encourage policymakers to take note of the study’s findings and rectify the increasingly destructive regulatory environment hindering local economic growth.”

According to “Finding Balance: How Well-Intended Policies Hamper Small Business Lending and Undermine Relationship Banking:”

Small Businesses Prefer Community Banks

  • 95% of surveyed small-business owners were satisfied with their overall experience partnering with community banks and the loan and credit offerings they received, while two-thirds preferred working with community banks to larger banks and fintechs.

  • Nearly 9 in 10 small-business owners said they partner with community banks because they offer or customize products and services unique to small-business needs, understand the local community, understand small businesses, or have a personal relationship with their business.

Community Bank Regulatory Burdens Continue Piling Up

  • More than 9 in 10 ICBA-member community bankers said the current regulatory environment is more challenging than it was five years ago.

  • 71% of respondents identified regulatory factors as one of their bank’s top three challenges.

New Rules Are Expanding Regulatory Mandates

  • More than 80% of community bank respondents said the Consumer Financial Protection Bureau’s 1071 small-business data collection and reporting rule would inhibit their small-business lending.

  • Nearly half of small-business owners said they would look for another lender that did not ask for the information on race, ethnicity, and gender that the 1071 rule requires banks to collect and report to the bureau.

Policymakers Can Alleviate the Burden

  • Congress and federal regulators can address recent regulatory challenges by nullifying and rewriting the 1071 rule, as supported by 94% of respondent community bankers, and rethinking Community Reinvestment Act modernization.

  • Moving forward, ICBA encourages policymakers to exempt community banks from rules targeting large financial institutions, hold nonbank institutions to consistent standards, reform CFPB governance, reduce data-collection requirements, and rigorously evaluate regulations during the policymaking process, such as through Economic Growth and Regulatory Paperwork Reduction Act reviews and Administrative Procedure Act notice and comment requirements.

The complete study is available on the ICBA website.

About ICBA

The Independent Community Bankers of America® has one mission: to create and promote an environment where community banks flourish. We power the potential of the nation’s community banks through effective advocacy, education, and innovation.

As local and trusted sources of credit, America’s community banks leverage their relationship-based business model and innovative offerings to channel deposits into the neighborhoods they serve, creating jobs, fostering economic prosperity, and fueling their customers’ financial goals and dreams. For more information, visit ICBA’s website at icba.org.