Valid point, but local and regional banks are primarily victims of the economy of scale. Larger banks can provide funds with lower APR as their operational costs and markups are lower per each tranche, hence they offer a more competitive price to the consumer.
Of course, the consumer may bemoan the fact that his loan officer doesn't know him by name and that the loan approval process is more formalized (more hoops) but that's simply how it is with larger institutions. Walmart vs. mom and pop store.
As per the regulation bogeyman, I'm usually for deregulation but unfortunately that cannot be applied to the banking system, as increased capital levels and reduced leverage are good for everyone, especially the taxpayer who may usually ends up paying for failed banks.
Also, in implementing current worldwide regulation regarding capital levels and liquidity risk the US specifically excluded medium and smaller banks.
So to repeat my point, the story about a poor business client that cannot get a loan due to overzealous regulation is, well, simply put, bullshit.
Also, in case of additional deregulation the banks would rather use their funds for more profitable segments of the market than SMEs (mortgages, cough, cough, mortgages).