More than one-third of community banks in Illinois are considering a sale or merger because of burdensome regulation, according to a survey conducted by the Illinois Bankers Association. Last year, the trade group asked all banks in the state how regulations were affecting their business and 160 responded. Of the 584 banks with headquarters in Illinois, 423 hold less than $250 million in assets. Since 2008, regulators have closed 47 banks in the state, according to the Federal Deposit Insurance Corp. Another 28 merged into larger firms. The House Financial Services Committee held a hearing Monday in Chicago. A group of community bankers testified that new regulations under the Dodd-Frank Act are diverting too many resources away from lending and toward compliance. "Consider the significant impact on the state of Illinois and its communities if these banks can't survive amid the mass of new regulations," said James Roolf, chairman of the IBA. Most of the bankers pointed directly to the Consumer Financial Protection Bureau, which still remains without a director. Community banks with less than $10 billion in assets will still be examined by their primary regulator. But the bankers continued lobbying for reforms to the still-forming agency, particularly for legislation introduced by the committee to install a five-member commission instead of a director and to make it easier for an oversight council to veto any CFPB rule. Dory Rand, president of the Woodstock Institute said reams of research show the regulations are necessary to prevent risky mortgages from hurting homeowners, their neighbors' equity, small businesses and local tax revenue as seen during the crisis. "We need the Dodd-Frank Act and the CFPB to lessen the risk of future financial crises and to establish a safer and more accountable financial system that works for everyone," Rand said. William Bates, the executive vice president of Seaway Bank and Trust Co. in Chicago said regulatory compliance for smaller bankers is more than twice as high than for larger firms. "Without quick and bold action to relieve some of the regulatory burden, there will be a contraction of the banking industry, with banks disappearing from communities over the next few years," Bates said. "Each bank that disappears from the community makes that community poorer." As it stands, a Senate vote on President Obama's nominee to run the CFPB Richard Cordray is still just as pending as the House legislation to reform the bureau. Write to Jon Prior. Follow him on Twitter @JonAPrior.