Connecticut bankers and policymakers fear too much regulation will choke smaller lenders that are the credit bedrock for the state’s business and consumer borrowers.
“If community banks are going to survive, they cannot be held to the same level of regulation that the large banks have,” state Banking Commissioner Howard Pitkin said to open a forum Tuesday at the Legislative Office Building in Hartford .
Pitkin, along with the heads of four Connecticut banks, discussed the impact of the Dodd-Frank financial reform law, which industry representatives said threatens the viability of community lenders.
Pitkin said compliance exams are becoming increasingly expensive for small lenders, which is putting their earnings under significant stress. And the financial reform law is only adding to that burden, Pitkin said.
In addition to added compliance burdens, new federal restrictions on overdraft fees and a new proposed cap on the “swipe fees” banks charge retailers and restaurants for accepting debit-cards will put further pressure on their bottom lines, Pitkin said.
The Hartford Business Journal recently reported that industry experts believe earnings pressure related, in part, to new financial reform requirements will cause a spate of mergers and acquisitions among banks in Connecticut in the coming years.
 “… The alternative is a group of large federally regulated entities who have no ties and little interest in the community,” Pitkin said, noting there are only half the 14,000 community banks that existed in the U.S. 15 years ago.
The loss of local credit decisions was one of the flags critics waved against Friday’s scheduled closing of the $1.5 billion merger between NewAlliance Bancshares Inc. in New Haven and First Niagara Financial Group of Buffalo, N.Y.
Tuesday’s forum was led by Rep. William Tong, D-Stamford, and Sen. Bob Duff, D-Norwalk, the co-chairs of the banking committee.
