Broad regulatory restrictions were placed on the banking industry, following the financial downturn. However, small-cap financial exchange traded funds may outperform as the smaller Main Street banks pushes for regulators to relax Dodd-Frank rules that were intended for Wall Street.

For instance, the PowerShares S&P SmallCap Financials Portfolio (NYSEArca: PSCF) and First Trust NASDAQ ABA Community Bank Index Fund (NasdaqGM: QABA) both target smaller companies in the financial space. PSCF takes a greater tilt toward small-caps at 73.9% and micro-caps at 26.1%. QABA includes mid-cap 25.9%, small-cap 36.7% and micro-cap 37.4%.

Small bankers have been arguing with regulators that many of the new financial rules intended for big banks are unjustly burdening community banks by impeding growth and their ability to generate a profit and lend, the Wall Street Journal reports.

There is “plenty of economic analysis and data that says that our country’s economy is being harmed…because of regulatory costs” on small and medium-size banks, Sen. Jerry Moran (R., Kan.), said in the article. “There’s a real interest in addressing that issue.”

The lobbying is beginning to work. Last week, the Federal Reserve and Consumer Financial Protection Bureau moved to relax restrictions on lending and acquisitions for smaller banks. Community banks, though, contend that other areas may also need adjustments, pointing to  international capital rules, additional mortgage lending relief for banks with up to $10 billion in assets and a broad exemption from enforcement by the CFPB.

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