Last month the FDIC released its Community Banking Study, part of several initiatives that began in late 2011 to better understand the role that community banks play in the U.S. economy as well as the opportunities and challenges facing this segment of the banking industry in the future. According to the study, community banks continue to play an important role in our economy and today comprise 95% of all U.S. banking institutions, despite a significant decline in the amount of assets held by community banks between 1984 and 2011.
Even with the many challenges that community banks face now and in the future – including consolidation of the banking industry, competition with non-community banks, and regulatory issues – the study notes the value of these institutions as community-focused organizations that are committed to building relationships and fostering economic growth and community development in their local communities. For example, even through economic downturns, community banks have almost always incurred lower credit losses than non-community banks which the report notes is “likely a result of the relationship lending approach favored by community banks.”
As a number of FUND Consulting’s clients are CDFI-certified community banks, we have seen the important role that these institutions play as community-based institutions that are striving to meet the unique capital and credit needs of their local communities.
In light of federal regulators’ decision to delay implementation of Basel III regulations – and for which community bankers have voiced their concerns that the new regulations will severely impact the viability of this segment of the banking industry – it is encouraging the FDIC’s efforts to better understand and address the challenges that community banks are facing today.
How does the community bank in your neighborhood serve your local community? What role do you think these institutions will have to play in the future of our economy?