'on The Sidelines': Community Bankers Fear They Are Missing Out On Their Moment

One of the most powerful banking lobbies of the past 20 years could be seeing its influence wane, even as the Trump administration moves to unwind financial regulations.

In theory, community banks, which serve customers in small towns and rural areas around the country, should be driving the policy conversation. Lawmakers on both sides of the aisle constantly tout the importance of Main Street lenders. And former community bankers lead both the Federal Reserve’s regulatory arm and the House Financial Services Committee.

But the big wins in the second Trump administration have mostly gone to the largest lenders, the national institutions with trillions of dollars in assets, according to more than a dozen current and former community bankers and lobbyists. Meanwhile, the push to bring cryptocurrencies into the mainstream threatens community banks much more than the largest institutions.

Some community bankers blame the Independent Community Bankers of America, their main trade group, for causing a rift within the industry. Others say the fading influence of the banks is due to the smaller role they now play in American life: Their numbers have shrunk dramatically over the past 20 years, as more Americans gravitate toward major Wall Street lenders.

“It is incredibly frustrating to watch, particularly right now, where there are opportunities for community banks to take full advantage of who is in leadership at the regulators and in Congress,” said Preston Kennedy, former president and CEO of Louisiana’s Bank of Zachary and a longtime ICBA board member. “Instead, we have just opted to sit on the sidelines.”

Losing sway in Washington could hasten the smaller banks’ decline, depriving rural America and small businesses of crucial credit, their leaders say. That could have broader economic implications.

Community banks, or banks that have less than $10 billion in assets and are therefore subjected to different oversight than larger lenders, disproportionately lend money to local businesses and homeowners: They direct 75 percent of their deposits to loans in local economies, according to calculations by Better Markets, an advocacy group, with a large share of overall lending to small businesses. The very biggest banks, by contrast, lend out just 40 percent, according to Better Markets. Some studies have also found that community banks lend more in downturns than their bigger counterparts, helping the economy recover in times of stress.

The tug of war between small and big banks is a longstanding feature of financial regulation. Big banks have historically counted on their broad reach and large wallets to get their way. Community bankers, however, have used their local ties to their advantage. They are in practically every congressional district, and their role as lenders to local businesses and the home for local depositors’ paychecks has given them a voice with their delegates.

When legislators rewrote financial rules following the 2008 crisis, small lenders had the upper hand, since their bigger counterparts shouldered most of the blame for the collapse. But now, as the Trump administration and lawmakers ease those regulations, the benefits are flowing largely toward big banks, say industry analysts and community bankers.

Regulators have proposed slashing capital requirements and have lowered leverage requirements for the very largest banks, potentially saving them up to $60 billion, according to calculations by Federal Reserve Governor Michael Barr. The agencies have also allowed banks to take on substantially more lending capacity. With armies of regulatory staff and big, flexible balance sheets, those wins disproportionately flow to the largest banks’ bottom lines.

Community banks have also scored some victories. The proposed capital rules, particularly new guidelines for mortgages and business loans, will impact their finances, and they experienced a similar cut to their main leverage requirement. The Consumer Financial Protection Bureau recently eased the data-collection burden for tiny lenders. And they have benefited from some of the supervision changes applied to all banks.

But small banks, whose balance sheets have less room for maneuver, will not be able to take advantage of new capital and leverage rules to the same extent as the larger banks.

At the same time, the rules put in place after the financial crisis to subject big banks to extra scrutiny are being weakened, giving large banks a new edge. Post-crisis supervision activities — such as stress testing and more subjective assessments by on-site regulators — have been softened. And the Office of the Comptroller of the Currency is now only subjecting the most massive banks to “heightened” scrutiny, lowering standards for most other big banks.

The Fed and the Federal Deposit Insurance Corp. declined to comment. The OCC did not respond to requests for comment.

Many community bankers blame the leadership of the ICBA for being too timid and going along with bigger banks too often.

“We are not taking advantage of the opportunities to leverage our capital in Washington and being certain that we are being vocal,” said Noah Wilcox, president, CEO and chair of Grand Rapids State Bank in Minnesota, who was recently on the ICBA board.

ICBA president and CEO Rebeca Romero Rainey disagrees: “We are at the table, as much or more than we have been before,” she said.

The fight over a sweeping cryptocurrency bill now under consideration on Capitol Hill exemplifies community bankers’ concern.

Banks, both large and small, are fighting a bipartisan deal that could potentially allow crypto companies and exchanges to offer rewards programs paying annual percentage yield to customers who hold stablecoins, a type of cryptocurrency designed to maintain $1 value. The fight has become a test of their power against the upstart cryptocurrency industry, which has poured massive sums into lobbying in Washington and campaign efforts across the country.

Banks say allowing rewards programs would encourage their customers to move their deposits out of banks and into stablecoins. Community banks have a lot to lose in the fight: Their bottom lines rely more on deposits than bigger banks.

Yet community banks have joined forces with banks of all sizes. The ICBA and the trade associations representing larger lenders have been jointly issuing press releases and statements and coordinating their strategies.

That’s a mistake, some community bank advocates say.

“Everyone is getting lumped together as banks, and ICBA is missing out on using their size and power to differentiate themselves,” said Anne Balcer, a former ICBA chief of government relations, now with Community Bank Advisory Services. “A $500 million bank operating in rural Iowa is lumped together with JPMorgan Chase.”

Some of the disagreement boils down to personality. Multiple sources described longtime ICBA head Cameron Fine, who retired in 2017, as “militant,” or willing to play hardball and clash with the bigger banks, particularly after the financial meltdown. Fine declined to comment.

Romero Rainey, his successor, herself a former community banker, is seen as more conciliatory toward the big banks and less vocal in Washington, said the same sources.

"We used to be the grassroots guys. And the previous leadership was ballsy and willing to take on criticism. ICBA today doesn’t have that same persona,” said one community banker, granted anonymity to speak candidly.

Supporters of the ICBA point to a number of wins under Romero Rainey, particularly that community banks with less than $5 billion were excused from paying for the rescue of larger banks that failed in 2023.

“As leaders, we all have our own unique style,” Romero Rainey said.

The alignment with big banks may have more to do with the shifting priorities and battle lines of Washington, according to the ICBA. The crypto fight and a separate White House push to require banks to collect their customers’ citizenship data, which banks have opposed, have small and large institutions fighting on the same side.

“There are times when you need to lock arms and be at the table together with the strengths of all the banks,” said Alice Frazier, CEO of Potomac Bank of West Virginia and chair of the ICBA board.

The debate comes at a time of widespread consolidation in the banking industry that has put community banks under threat.

In 2007, there were more than 6,000 banks with less than $10 billion in assets, and they held 30 percent of U.S. deposits, according to data from the Fed, FDIC and Better Markets. In 2025, there were only around 4,000, holding just 17 percent of the country’s deposits, according to the same data. Meanwhile, banks with more than $100 billion in assets make up 67 percent of total deposits today, up from 46 percent in 2007.

“As the number of community banks have declined, there are fewer voices out in the country expressing their opinions. Fewer voices have to be louder and more engaged,” said Rep. Frank Lucas (R-Okla.).

Community banks’ relative importance in Washington could continue to wane without regulatory changes, some small bankers say.

“We have to come back to the basic question: Is the voice of community banking truly regarded and being respected in today’s debates?” said Christopher Williston, president and CEO of the Independent Bankers Association of Texas, an advocacy group.