New Grouped Tag for Community Banking
In the research publication from the St. Louis Federal Reserve, The Future of Community Banks: Lessons from Banks That Thrived During the Recent Financial Crisis by Gilbert, Meyer, and Fuchs, they studied the distinguishing characteristics of community banks that managed to maintain the highest supervisory ratings during the financial crisis between 2006 and 2011. Their rating system focused on six areas of bank safety and soundness examinations, called CAMELS:
Community banks are an integral component of our nation’s economy and of the recovery effort for individuals, communities, and the nation alike. Community banks serve all ranges of populations and all types of businesses held in these areas, from rural to urban. It has becomes extremely cumbersome for these community banks to sustain under the immense burden of regulatory, tax, and paperwork requirements handed down in the Dodd-Frank Act. Community Banks simply do not have the manpower or monetary resources of bigger financial institutions, and these requirements weigh disproportionately heavy on community banks and their managements, pulling vital resources from attraction of more capital or provision of credit to customers.
In early 2013, Federal Reserve Governor, Elizabeth A. Duke, gave a speech which detailed her observations and predictions for the community banking industry. Most commonly defined as banks with under $1 billion in assets, community banks were most highly represented in our most recent graduating class. In total, 60% of the 155 2013 GSBLSU graduates came from these local banks.
Of course, considering how many students come to GSBLSU from community banks, we found her speech to be of particular interest and, despite her recent resignation, felt that it was a good piece to share. She gave her own experience as a community banker in the early 90s and compared that to the challenges that are being faced today. In total, she reviewed three main points:
- Community Bankers Are Being Heard – Over 2,000 comments, many from community banks, were received and will be considered before issuing final capital rules
- Community Bank Research – This includes insight on determinants of community bank profitability and characteristics of thriving community bank.
- Using Research to Shape Supervisory Guidance on Lending – This includes insight on residential mortgage lending, commercial real estate lending and small business lending.