WASHINGTON — A top Democratic lawmaker said Wednesday that the compliance burdens placed on small and midsize banks outweigh the risks they pose to the financial system.

Community banks have lamented the high compliance costs associated with a multitude of new rules and said they are under the same regulatory magnifying glass as the largest banks that nearly sunk the U.S. economy.

"Tailored regulations are always important," Sen. Sherrod Brown, the top Democrat on the Senate Banking Committee, told an American Bankers Association conference.

"When we have 'X' number of examiners and 'X' number of auditors looking at institutions, wouldn't the public be better served to have a higher ratio of them [examining the larger banks]? Wouldn't it make more sense they pay more attention at the [largest banks] and a little less on [community banks]?" Brown said.

He added that if institutions like JPMorgan Chase or Citigroup had as many examiners per dollar of assets that community banks do, "they would have tens of thousands of examiners crawling all over them."

He said one solution would be to have a tiered system, where the level regulatory scrutiny would coincide with the size of the institution.

"The banks that are this size have this many sets of rules and if they are bigger they have more and if they bigger they have more," he said.

Brown also said regulators could do a better job of coordinating with each other because "that makes your compliance cost less and makes them more effective and probably means that more attention will be paid to the bigger guys."

ABA President Frank Keating, who was speaking alongside Brown at the conference, said there are estimates that the compliance costs for some banks are as high as 5% to 20% of operating income.

While Brown said he was open into looking into legislative adjustments that would help smaller institutions, he said the danger is "…if it bleeds into weakening regulations for bigger institutions or lessening Dodd-Frank."

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