Banking

The Federal Reserve System recently introduced Community Banking Connections, a new publication and website focused on community banks, generally defined as those with $10 billion or less in total assets.

Fed chair discusses community banks
The inaugural issue, released on September 7, features an interview with Federal Reserve Chairman Ben Bernanke on the importance of community banking and some of the challenges facing the industry. Of particular concern has been the shrinking array of profitable lending opportunities, he said. Facing tough competition from larger banks in such volume-driven areas as consumer loans, community banks have tended to specialize in business lines, such as the hard-hit commercial real estate sector. Finding viable alternatives has been challenging—a pressing issue for community banks "because their size and small geographic footprints have traditionally made them vulnerable to risk," he explained.

Community bankers have also expressed concern about the regulatory environment, especially the impact of new rules issued under the Dodd-Frank Act, Bernanke said. Although many of the provisions are aimed at curbing organizations "too big to fail," the Fed is doing more to clarify which regulations are intended for community banks. "We have not always communicated our specific expectations in this regard as clearly as we could have," he noted. Some recent measures to provide greater clarity include stating at the beginning of each piece of supervisory guidance which banks are affected. "That way, banks don't have to waste resources on requirements that don't apply to them," he said. The Fed took steps to simplify some of the complex proposed rules implementing the Basel III capital framework by including summary addenda to guide community banks and help them compare the proposed and current rules.

Enhanced communication, clarity the goal
The publication and website are part of the Fed's larger efforts to strengthen its communications with community bankers. "We want to hear from readers that may have varied perspectives," the Chairman noted. "This publication will be successful if it provides useful insights and promotes greater dialogue, rather than just being a bunch of words on paper that get lost in the shuffle."

Another, more formal way in which the Fed communicates with community bankers is through the Community Depository Institutions Advisory Council. The committee, profiled in the current issue of Community Banking Connections, was formed in 2010 as a way to gather input from smaller institutions. The third quarter issue also features articles on interest rate risk management and addresses frequently asked questions about regulatory capital controls.

September 20, 2012