WASHINGTON — Community banks risk losing influence in Washington even as the Trump administration rolls back financial regulations, with many of the biggest regulatory victories flowing to the nation’s largest banks rather than smaller lenders, according to an analysis published by Politico.
The report found that while community banks have traditionally wielded outsized political influence through their presence in congressional districts nationwide and their role in financing local businesses, industry leaders say recent regulatory changes have disproportionately benefited large financial institutions.
Community banks, generally defined as institutions with less than $10 billion in assets, direct a larger share of their deposits into local lending than their larger counterparts and play a significant role in financing small businesses and homebuyers, Politico reported, citing data from advocacy group Better Markets.
Several community bankers interviewed by Politico said they are frustrated that opportunities created by a Republican-controlled Congress and regulators with community-banking backgrounds have not translated into greater gains for smaller institutions.
‘Incredibly Frustrating’
“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,” Preston Kennedy, former president and CEO of Louisiana’s Bank of Zachary and a longtime board member of the Independent Community Bankers of America (ICBA), told Politico.
The analysis noted that regulators have proposed lowering capital and leverage requirements for the largest banks, changes that could save major institutions billions of dollars while expanding their lending capacity. Although community banks have also benefited from some regulatory relief, analysts told Politico that their smaller balance sheets limit their ability to capitalize on the changes to the same degree as larger competitors.
The Politico analysis highlighted growing tensions within the community banking industry over the leadership of the ICBA, the sector’s primary trade group. Some bankers told Politico that the organization has become less aggressive in advocating for community-bank interests and too willing to align with larger banking organizations.
“We are not taking advantage of the opportunities to leverage our capital in Washington and being certain that we are being vocal,” Noah Wilcox, president, CEO and chair of Grand Rapids State Bank in Minnesota, told Politico.
‘At the Table’
ICBA President and CEO Rebeca Romero Rainey rejected suggestions that the organization has lost influence.
“We are at the table, as much or more than we have been before,” Romero Rainey told Politico.
According to the analysis, disagreements have surfaced as banks confront legislation that could expand the use of stablecoins and other cryptocurrency products. Community bankers worry that allowing crypto firms to offer yield-bearing stablecoin products could encourage consumers to move deposits out of traditional banks, a threat viewed as particularly significant for smaller institutions that rely heavily on deposits for funding.
Some community-bank advocates argued that the ICBA should more clearly distinguish the interests of smaller lenders from those of large Wall Street banks.
“Everyone is getting lumped together as banks, and ICBA is missing out on using their size and power to differentiate themselves,” Anne Balcer, a former ICBA government relations executive, told Politico.
Shrinking Number of Banks
The debate comes as the community banking sector continues to shrink, much like the number of credit unions. Politico reported that the number of banks with less than $10 billion in assets has fallen from more than 6,000 in 2007 to roughly 4,000 in 2025. During the same period, their share of U.S. deposits declined from 30% to 17%, while banks with more than $100 billion in assets increased their share of deposits from 46% to 67%.
Rep. Frank Lucas (R-OK) told Politico that fewer community banks means fewer voices advocating for the industry in Washington.
“As the number of community banks have declined, there are fewer voices out in the country expressing their opinions,” Lucas said. “Fewer voices have to be louder and more engaged.”
Christopher Williston, president and CEO of the Independent Bankers Association of Texas, told Politico that the industry’s future influence may depend on whether policymakers continue to view community banking as distinct from the broader banking sector.
“We have to come back to the basic question: Is the voice of community banking truly regarded and being respected in today’s debates?” Williston said.
