Janet L Yellen: Welcoming remarks
Speech by Ms Janet L Yellen, Chair of the Board of Governors of the Federal Reserve
System, at the Community Banking in the 21st Century, The Third Annual Community
Banking Research and Policy Conference, cosponsored by the Federal Reserve System and
Conference of State Bank Supervisors, Federal Reserve Bank of St. Louis, St. Louis,
Missouri, 30 September 2015.
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Thank you. It is truly a pleasure for me to join President Bullard and Chairman Cotney in
welcoming you to the Community Banking Research and Policy Conference, which I am
proud to say has been cosponsored since its inception by the Federal Reserve System and
the Conference of State Bank Supervisors (CSBS).
This is the third year for this conference, which I consider a milestone. The first time you
organize a conference like this, all you can be sure about is that there was indeed enough
research and interest for such a conference. The second time it is held, you proved that you
could do it again.
But the third year, this year, is when we can start to feel we have established a tradition. If this
year's conference comes even close to being as successful as the first two were, and I expect
it will be, I hope that we have established an ongoing role for this gathering, which provides
such a great opportunity for bankers, regulators, and academic researchers to come together
to share ideas and insights about the issues that matter most in community banking.
Based on the agenda and conference materials I have seen, I expect participants over the next
two days will tackle some of the most important issues facing community banks, provoke
discussion and debate about opportunities and challenges, and generate some promising
ideas about how community banks can continue to play the indispensable role they have
played in so many communities. The lineup of speakers, which includes my Federal Reserve
Board colleague, Governor Brainard, is impressive. She and others will delve deeply into the
important research questions and other issues facing community banking.
My role today is to welcome you on behalf of the Federal Reserve Board. In the interest of
getting to the important work of this conference, I will be brief, but if I accomplish anything by
speaking to you today, I hope it is to convey the Board's understanding of the unique and
important role of community banks in our financial system as well as the Board's
commitment, at the highest level, to consider how our supervisory and regulatory decisions
affect those institutions.
My fellow Board members and I know that community banks provide essential financial
services to households, small businesses, and farms in communities throughout the country.
We know that community banks serve many customers that large banks do not and provide
services that are not offered by large banks in many communities. This circumstance is
especially true in rural areas and other small communities, where community banks are
sometimes the only retail financial institutions.
We understand that community bankers serve members of their local communities who are
not just their customers, but also their neighbors and their friends. We know the strong links
these banks have to the people and businesses in their communities provide firsthand
knowledge of local economic conditions. My colleagues on the Board understand, as I do,
that these close ties give community bankers special insight and understanding into local
needs so that they can tailor their products and services to meet those needs.
Although community banks largely kept to their traditional business model of prudent, local
lending and avoided the excessive risk-tasking that helped fuel the financial crisis, that crisis,
and the deep recession that followed, devastated many communities and the banks that
serve them. The significant improvement in the economy since then has helped communities
and community banks, but I am well aware that the challenges for this sector continue, and
my Board colleagues understand this also.
We know and appreciate these concerns because the Board makes it our business to
regularly and extensively meet with and talk to community bankers and industry leaders. The
Board of Governors meets twice a year with the Community Depository Institutions Advisory
Council, which includes representatives of community banks, thrifts, and credit unions in
each of the 12 Federal Reserve Districts.1 The Board also has a Subcommittee on Smaller
Regional and Community Banking, headed by Governor Powell and including Governor
Brainard.2
Let me also say that the experiences, aspirations, and challenges of community banking are
not new to me. Before I became Chair of the Board of Governors and Vice Chair before that,
I spent six years as president of the San Francisco Fed. In this role, I was responsible for the
supervision of a substantial number of community banking organizations in the nine states of
the 12th District.
Among the things I learned from that experience is that, when it comes to bank regulation
and supervision, one size does not fit all. To effectively promote safety and soundness and
ensure consumer compliance without creating undue regulatory burden, rules and
supervisory approaches should be tailored to different types of institutions.
That is why the Congress chose to exempt community banks from many aspects of new,
post-crisis regulations and why financial regulators, including the Fed, have otherwise
recognized the differences between community banks and larger, more complex institutions.
The Federal Reserve is committed to this approach to community bank oversight and to
ensuring that new and existing regulations are not unduly burdensome for community banks.
One way we are fulfilling this commitment is through the regulatory review required by the
Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA). The Federal
Reserve and other agencies involved in the EGRPRA process have so far held four in a
series of six planned outreach meetings at locations across the country. We have heard
many comments about community bank concerns and are taking those insights into account
as we consider options for alleviating unnecessary regulatory burden.
Let me conclude by returning to the occasion of this conference and what I believe it says
about the Federal Reserve's commitment to supporting the ongoing role of community
banking in America.
In addition to its responsibilities for monetary policy and financial regulation and supervision,
the Federal Reserve takes very seriously its role as a research institution. We believe
strongly in the idea that high-quality research can add to knowledge and understanding and
help inform economic and financial policymaking to yield better decisions that benefit society.
The Fed instituted this conference in partnership with the CSBS because we believe that
research can help us better understand the benefits that community banks provide to society
and the challenges they face. The work presented at this conference and subsequent
research that may be spurred by this work can deepen community bankers' understanding of
their businesses, and it can help state and federal regulators make better-informed
decisions. Ultimately, research can help provide answers to how community banks can
continue to succeed in the 21st century.
Thank you for this opportunity to speak, welcome to St. Louis, and I hope you enjoy the
discussions of the next two days.