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What Defines a Community Bank?

There is general recognition of the regulatory costs and obstacles facing community banks.  However, determining the types of regulatory reform necessary for community banks is continually stalled by disagreement on which institutions should benefit from tailored regulation.  

Using asset thresholds alone to differentiate between types of banks is not practical, and it fails to recognize the businesses practices or complexity of a given institution.  

State regulators agree that defining community banks for the purpose of right-sized regulation requires a definition that more fully captures the community bank business model. State regulators support a definition that examines an institution’s business activities, funding model, and geographic footprint and that does not solely look to asset size.  

This approach moves away from relying solely on asset thresholds and incorporates other factors more closely tied to the community bank business model such as geographic footprint, lending activity, and locally-oriented management and governance.

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