They argue that the additional regulation has resulted in significant regulatory burden, particularly for small banks, that has stymied economic growth and reduced consumers' access to credit. Financial regulation can result in both benefits and costs. "—include protecting consumers from fraud, discrimination, and abuse; ensuring that banks are less likely to fail; and promoting stability in the financial system. The cost associated with government regulation and its implementation is referred to as regulatory burden . The concept of regulatory burden can be contrasted with the phrase unduly burdensome . Whereas regulatory burden generally refers to the costs associated with a regulation, unduly burdensome refers to the relationship between the benefits and costs of a regulation. For example, some would consider a regulation to be unduly burdensome if costs are in excess of benefits or if the same benefits could be achieved at lower costs. But the mere presence of regulatory burden does not mean that a regulation is unduly burdensome. Consumer Protection Regulation . If the rule is determined to have a significant economic impact on a substantial number of small entities, the regulator that is issuing the rule is required
to describe, among other things, (1) the reasons why the regulatory action is being considered; (2) the small entities to which the proposed rule will apply and, where feasible, an estimate of their number; (3) the projected reporting, recordkeeping, and other compliance requirements of the proposed rule; and (4) any significant alternatives to the rule that would accomplish the statutory objectives while minimizing the impact on small entities. In addition, financial regulators are required to give consideration during the rulemaking process about what effect rules would have on small banks. Supervision and enforcement are also structured to pose less of a burden on small banks than larger banks. Because of this requisite differential treatment of small and large banks, one could argue that there not is a "one-size-fits-all" approach to bank regulation. Most aspects of the regulation of small banks are designed to impose less of a burden on small banks than larger banks, but that does not necessarily prove whether the existing regulatory structure is unduly burdensome for small banks. Thus, if small banks are facing unduly burdensome regulation, it is either in absolute terms, as a result of numerous rulemakings implementing the Dodd-Frank Act and other recent acts, or because small banks have less capacity for regulatory compliance than large banks (because there is economies to scale to regulatory compliance, for example), and not because small banks face relatively more regulatory burden than large banks. Nevertheless, given the role of large banks in the crisis, policymakers have been particularly focused on the systemic risk posed by large banks and ensuring that they are not "too big to fail" (meaning that policymakers would "bail them out" to prevent their failure because of systemic risk concerns). Economies of Scale to Compliance

Another potential rationale for regulating small banks differently from large banks would be if there are economies of scale to regulatory compliance costs. The Paperwork Reduction Act ( P.L. The spectrum of options ranges from regulating banks in the same way regardless of size to a separate regulatory regime for small banks and large banks, with various approaches in between. Maintain Status Quo (Ad Hoc Exemptions)

Absent change to the status quo, all banks will continue to be assigned a primary regulator by charter and subject to the same regulations except in cases where exemptions or tailoring based on size has been provided by statute or regulator discretion. For example, 13 of the 14 "major" rules issued by banking regulators pursuant to the Dodd-Frank Act either include an exemption for small banks or are tailored to reduce the cost for small banks to comply. Accurately assessing regulatory burden and determining whether the burden rises to the level of being unduly burdensome, therefore, is important for policymakers to make informed judgments. Quantifying the magnitude of regulatory burden has been a challenge for researchers, however, because banks do not track their compliance costs and regulators do not typically provide estimates of the costs of new rules.
Since the financial crisis, policymakers have focused on addressing the failures that led to turmoil and ensuring that the financial system and the economy are better positioned to withstand future market disruptions. Some believe that the actions taken to realize these goals have been beneficial; others argue that the pendulum of regulation has swung too far and that the additional regulation has stymied economic growth and reduced consumers' access to credit. Much of the debate has centered on how new regulation has affected small banks.
A central question about the regulation of small banks is whether an appropriate tradeoff has been struck between the benefits and costs of regulation. The benefits of financial regulation include protecting consumers from fraud, discrimination, and abuse; ensuring that banks are less likely to fail; and promoting stability in the financial system. The costs associated with government regulation and its implementation is referred to as regulatory burden. The concept of regulatory burden can be contrasted with the phrase unduly burdensome, which refers to the relationship between benefits and costs. Some would consider a regulation to be unduly burdensome if costs exceed benefits or if the same benefits could be achieved at lower costs. The presence of regulatory burden does not mean that a regulation is unduly burdensome. Critics who believe that regulation is unduly burdensome point to the significant decline in the number of small banks over time. There could be other factors driving consolidation, however. For example, mergers are the largest cause of consolidation, and could occur when banks are financially strong or weak.
Of the 14 "major" rules issued by banking regulators pursuant to the Dodd-Frank Act (P.L. 111-203), 13 either include an exemption for small banks or are tailored to reduce the cost for small banks to comply. In addition, during the rulemaking process, financial regulators are required to consider the effect of rules on small banks. Supervision and enforcement are also structured to pose less of a burden on small banks than larger banks, such as by requiring less frequent bank examinations for certain small banks. This report provides several examples that could be offered to counter views that there is a "one-size-fits-all" approach to bank regulation and that new regulation has increased regulatory burden relative to large banks. If small banks are facing unduly burdensome regulation, it is either in absolute terms or because small banks have less capacity for regulatory compliance than large banks do.
Quantifying the magnitude of regulatory burden has been a challenge for researchers because, among other reasons, federal statute does not require regulators to make quantitative estimates for all rules that they issue and because banks do not track the compliance costs spread throughout their operations. The difficulty in accurately assessing regulatory burden and in determining whether the burden rises to being unduly burdensome can make it challenging for policymakers to make informed judgments about the merits of proposals to provide regulatory relief.
The status quo is best characterized as applying ad hoc exemptions to certain regulations for banks based on their size and volume of activity, and most legislative proposals would adjust those exemption levels. Alternatives to the status quo range from regulating all banks in the same way, regardless of size, to implementing a separate regulatory regime for small and large banks, with various approaches in between. A focus on taxpayer protection and avoiding regulatory arbitrage would argue in favor of regulating all banks consistently. Rationales for regulating small banks differently from large banks include the systemic risk posed by large banks, economies of scale to regulatory compliance, a lack of critical mass of small banks to which some regulations would be relevant, and a desire by some policymakers to promote small banks.