Small banks, big burdens: How regulatory requirements are rewiring the DNA of bank management for SMEs

This systematic literature review examines how prudential regulation is associated with changes in bank management, with a particular focus on European small and medium-sized (SME) banks. Based on 105 publications, we synthesize evidence across strategy, profitability and performance, information systems and data governance, reporting, and regulatory technology (RegTech). The review suggests that regulatory requirements are discussed not only in terms of compliance costs; they change how banks allocate resources, design control infrastructures, and build digital compliance capabilities. For smaller institutions, these effects are amplified by fixed-cost burdens, legacy IT, limited governance capacity, funding constraints, and dependence on external providers. We contribute by integrating fragmented finance, accounting, and information systems research into a mechanism-based framework that organises regulatory pressure, managerial responses, and organisational outcomes. The key take-away is that regulation is increasingly discussed as a pressure associated with both economic constraints and socio-technical capability demand.