Data Show Regulatory Burden Falls Hardest on Community Banks

Posted: Nov 26 2025

Ten years of survey data from banks show that the cost of regulatory compliance eats up a larger percentage of resources for smaller community banks than it does for larger banks, according to a recent report by the Conference of State Bank Supervisors.

For more than a decade, CSBS has surveyed community banks every year on a wide range of issues. A recent analysis of survey data from 2015 to 2024 found that the smallest banks reported spending roughly 11% to 15.5% of their payroll on compliance tasks, compared with 6% to 10% at the largest institutions. The pattern held true for various compliance areas – for example, accounting and auditing expenses devoted to compliance ran 5 to 17 percentage points higher for smaller institutions during the time period studied.

“The evidence puts forth a clear conclusion: Regulatory costs behave more like a fixed overhead cost than a variable one, meaning they do not scale down gracefully. The smaller the bank, the bigger the bite,” wrote survey authors CSBS Chief Economist Thomas Siems and Vice President for Policy Nathan Ross.

The authors added that regulatory changes made after the 2008 financial crisis had the cumulative effect of raising compliance costs.

“While large banks could absorb those fixed costs, community banks had to spread them across far fewer employees and smaller balance sheets,” they wrote.

To view the report, visit: https://www.csbs.org/too-small-scale-what-10-years-data-say-about-community-bank-compliance-costs