Fed Gov. Raskin Discusses Small-Bank Supervision

Fed Gov. Raskin Discusses Small-Bank Supervision

photo of Fed Gov. RaskinBlue crabs and banking regulation might appear completely unrelated. But in a recent speech about small-bank supervision, Federal Reserve Governor Sarah Bloom Raskin cited the prevalence of the crustaceans as an example of why regulators must have a deep understanding of the local concerns of community bankers and their customers.

The importance of thinking locally
"It is important that examiners also understand local market conditions to be able to put the bank's management and credit decisions in the proper context," said Raskin in a January 6 talk before the Maryland Bankers Association. "For example, when I was commissioner here, there was an old joke among state examiners that you never dared set foot in a bank on the Eastern Shore if you didn't know the latest monthly count of blue crabs."

Chesapeake Bay crabs are a culinary and economic staple in communities surrounding the bay. Raskin, former commissioner of financial regulation for the state of Maryland, explained the Fed's differing approaches to supervising community banks and larger, more complex banking companies.

Flow of credit receives supervisory attention
She noted that the Federal Reserve Board maintains a group dedicated to overseeing the supervision of smaller banks. That group, Raskin said, considers not only whether policies are appropriate for community banks but also whether the policies could restrict the flow of credit to sound borrowers. The latter point was a focus of her remarks.

"One of the things that I try to do whenever I review policies is to draw on my experience of working with community banks in Maryland and think about the effects these policies are likely to have on community banks and the areas they serve," said Raskin, a member of the Federal Reserve Board subcommittee that oversees the supervision of community banks. "Ideally, our supervisory policies result in stronger community banks that are able to lend and promote sustainable economic growth in their communities."

January 19, 2012