FDIC Chairman Delivers Remarks Concerning the Strengths and Challenges Facing Community Banks

Federal Issues FDIC Community Banks CSBS

On October 23, FDIC Chairman, Martin J. Gruenberg, spoke at an event hosted by the Illinois Department of Financial and Professional Regulation and the Conference of State Bank Supervisors about the important role community banks play in the U.S. financial system. Gruenberg noted that comparing the performance of community banks to noncommunity banks in the post-crisis period can be instructive. For instance, “community bank loans have grown faster than loans held at noncommunity banks in: 1- to 4-family mortgages, commercial real estate loans, and commercial and industrial loans.” In fact, Gruenberg stated, “[i]n each of the past three years, annual growth in community bank net income has equaled or exceeded growth at noncommunity banks.” Further, community banks continue to provide more credit for small business and banking services in general in non-metro areas.

Gruenberg went on to highlight some of the challenges facing community banks: (i) fewer resources for burdensome regulatory compliance; (ii) appraiser availability and shortages, especially in rural areas; (iii) complex capital requirements; (iv) the ability to effectively respond to information technology challenges, such as maintaining strong cybersecurity programs; and (v) succession planning and staff recruitment. Beyond agency efforts to address these concerns through advisors and proposed changes, Gruenberg spoke about the FDIC’s Community Banking Initiative, which offers resources and tools to help community banks stay informed of regulatory changes and manage costs.