United States one dollar bills are seen on a light table at the Bureau of Engraving and Printing in Washington in this November 14, 2014, file photo. (Xinhua/REUTERS)

NEW YORK, Aug. 2 (Xinhua) -- The current U.S. financial regulation system, defined by statutes such as the Dodd Frank legislation, has been burdening small banks across the country with unnecessary restrictions and costs, an expert on U.S. banking regulation said here on Wednesday.

Jacques Schillaci, Counsel at Linklaters LLP (Limited Liability Partnership), a multinational law firm, said in a news briefing in the United Nations that small banks in the United States, namely community banks and regional banks, don't pose the same risks to the financial system as big banks might, but it is harder for them to bare the regulatory expenses than their larger counterparts.

Schillaci, among many other U.S. analysts, believed that small banks in the United States were not responsible for the latest 2008 financial crisis.

The financial crisis began with a collapse in the U.S. subprime mortgage market, and developed into a global banking crisis with the bankruptcy of the investment bank Lehman Brothers. Many considered excessive risk-taking by big banks as the major cause of the crisis.

"Small banks just didn't engage in those sophisticated financial activities like subprime lending or risky speculation," Schillaci said.

In response to the 2008 financial crisis, former U.S. President Barack Obama enacted the Dodd-Frank Act in 2010.

Under the law, regulators introduced strict capital standards on banks, called for annual stress tests for systemically important banks, and created the Consumer Financial Protection Bureau.

Schillaci argued that even though the regulations Dodd Frank Act imposed were initially directed at larger banks, they have become extremely burdensome for small banks.

"The thing about regulation is that it costs money to comply with that. Larger institutions have found it easier to absorb these costs than smaller ones," he explained.

Frank Sorrentino, Chief Executive Officer of ConnectOne Bank, a U.S. community bank based in the state of New Jersey, wrote earlier this year that "Currently, the reporting requirements of Dodd-Frank are too onerous for a small bank with limited staff to keep up with."

"We've seen the number of banks in the United States steeply decline year over year, as smaller banks fold to regulatory pressures or undergo M&A (mergers and acquisitions) in order to absorb compliance costs," the banker wrote.

Report from George Mason University showed that the number of small banks (banks with 10 billion U.S. dollars or less in assets) has declined to 27 percent in fours years after the bill was enacted.

The trend has concerned many since community banks provide nearly half of small-business loans issued in the country, according to the American Enterprise Institute.

The real economy is hurt, because small banks are crucial sources to finance domestic small and medium-sized businesses, but now they are diminishing, Schillaci said, adding that deregulation on those banks can really help to inject vigor into the economy.

U.S. President Donald Trump has already vowed to scale back the Dodd-Frank Act, saying the Wall Street reform law is a "disaster" and is "horrible" for business vitality.

"There is chance that we'll first see legislation changing in terms of the community banks and regional banks issue," said Schillaci.