Center for American Progress

Rolling Back Financial Regulations Won’t Boost Community Banks

Rolling Back Financial Regulations Won’t Boost Community Banks

Rolling back financial reform and consumer protections in the name of helping small banks could bring back the risky practices that led to the financial crisis.

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idea_bulbRecently, financial reform opponents have seized upon the challenges facing small banks as an opportunity to launch a campaign for regulatory rollback. They claim that these rules have harmed small banks and made it unprofitable for them to lend to consumers. In the name of helping community banks, lobbyists representing a wide range of financial institutions—including both larger banks and nondepository financial institutions—have proposed a broad suite of policies that would undo many of the financial reforms and consumer protections put in place in the wake of the financial crisis to prevent similar crises in the future.

In implementing financial reform, legislators and regulators already have recognized the important role that small banks play in communities across the country and the unique needs of these institutions, providing them with exemptions from requirements that apply to their larger counterparts. Legislators should therefore be skeptical of calls for further regulatory relief and should carefully consider the costs and benefits.

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