Chairman David Cotney, CSBS-Federal Reserve Research Conference
Commissioner of Banks, Massachusetts Division of Banks
Community Banking in the 21st Century Research Conference
September 30, 2015
Thank you, Julie, for the kind introduction.
Good afternoon and welcome everyone to the 3rd Annual Community Banking in the 21st Century Research and Policy Conference hosted by the Federal Reserve System and the Conference of State Bank Supervisors. It is my pleasure to be here today, opening this year’s conference, and I look forward to what’s sure to be two days of thought provoking discussion and dialogue.
Now entering its third year, the conference continues to impress both in the quality of research presented and in its engagement of a broad range of stakeholders.
One unique aspect of the research conference that I look forward to each year is the direct input received from community bankers. Every part of this conference is about community banking and community bankers. And while it would be easy for researchers and regulators to come together, present their findings on community banking, pack up, and then head home, we have made a deliberate attempt to structure this forum in a way that gives community bankers a voice.
From the community bankers who are on the research panels, to the keynote speaker, to the bankers who are in attendance, this emphasis on direct feedback from the industry is part of what sets this conference apart. It provides us with an on-the-ground “reality check” to complement the research, and in some cases, challenge our assumptions.
And, since not every community banker can come to St. Louis to attend the conference, we also reach out them. This year, state regulators in 27 states held town hall meetings between April and July with their community bankers, and CSBS and the Federal Reserve conducted a survey of nearly 1,000 community bankers.
Some common themes emerged from the town hall meetings. For example, a lack of clear regulatory expectations and perceived aggressive examination tactics have led to banks hiring more compliance personnel and third-party auditors, both of which are high in demand and very expensive. This has led community banks to abandon some financial products. As one banker put it to me at our town hall meeting in Massachusetts, “The first question should not be ‘what will the regulator think?’ It should be ‘How many people can we help?’”
At the same time, the town hall meetings reveal the vibrancy and diversity that exists among our nation’s community banks. Each meeting revealed the unique opportunities and challenges community bank face based on their location and their customers. The summaries of those town hall meetings will be made available in the Research Conference publication you will receive tomorrow, and I encourage you to read through them when you get the opportunity.
It is this type of diversity in our banking industry that has led to a robust discussion between regulators and policymakers on how to best define a community bank. It has become increasingly clear that strict asset thresholds fall short at identifying and defining community banks. And, properly identifying community banks has important consequences for making policy and our supervisory approach.
The Federal Deposit Insurance Corporation (FDIC) has already established a community bank definition that takes into account an institution’s business activities, funding model, asset size, and geographic footprint. While the FDIC uses this definition for research purposes, state regulators see it as a strong foundation for policymakers seeking to define community banks. And, since some banks may not fit within the FDIC definition but nonetheless operate as a community bank, institutions should be able to petition their chartering authority for recognition as a community bank.
I want to point out one more new initiative in this year’s conference. Earlier this year, CSBS launched the 2015 Community Bank Case Study Competition where undergraduate student teams partnered with community banks and conducted first-person case studies. Not only will this effort help us build a further understanding of the community bank business model nationwide, but it also serves as an opportunity to introduce a new generation of bright students to the world of community banking.
I’ll leave you with one last suggestion. To all of my colleagues who are here today, if there’s one thing I could recommend to you over these next two days, that is this: As you hear the research, listen to the panelists, and engage in discussion with those around you, think about how you can implement what we learn here to improve your supervisory approach back home. We have a responsibility to use the data and knowledge we can to drive better policies and better decision-making.
Thank you, and please enjoy the conference.