##ing the innovation in the banking sector. consumers seemed to increasingly weigh convenience over safety, as a number of non - banks increased their market share. to a lesser degree, but still concerning, was that of the convenience factor. it drove some small business borrowers to move away from lenders with whom they had longstanding relationships. in some cases, those borrowers were even willing to pay much more for credit for the sake of convenience. unfortunately, some borrowers learned the hard way that convenience does not always outweigh a banking relationship — particularly when a business or community experiences a significant hardship such as a natural disaster. i regularly heard stories of how small businesses that borrowed from an online lender were unable to reach anyone to discuss their situation during a crisis and ultimately had their loans called because of missing a payment. in these situations, i also heard stories of how the local community bank that understood the local situation and wanted to see the business and the community survive, would step in, and refinance the original loan to help the small business 1 / 7 bis central bankers'speeches return to more normal operations. i also heard about challenges with core processors and how legacy contracts and a lack of competition for core processing services was stifling innovation. we saw several fintechs become “ mainstream ” nationally, and we saw a proliferation of technology solutions targeted at helping community banks become nimbler in adding new products and services. from a supervisory perspective, the federal reserve actively explored ways to reduce regulatory burden and provide greater transparency into the work of bank supervisors. using research presented in prior years at this conference, we applied findings showing the disproportionate regulatory burden borne by our smallest institutions and looked across our processes to find ways to tailor our supervisory model to more accurately reflect the risk posed by these smaller financial institutions. and then came march 2020 and the arrival of the covid - 19 pandemic in the u. s. despite the many choices consumers have for managing their money and purchases outside of the traditional banking system, we witnessed a systematic flight to the safety of fdic - insured deposits in state or nationally chartered banks. specifically, total deposits at all fdic - insured institutions increased by 22 percent when comparing deposit data from 2019 to 2020. 1 small business lending also increased significantly. from the end of 2019 to the end of the second quarter of 2020 alone, small loans to businesses at community banks, a proxy for small business lending, increased by 39 percent.

##ing to hedge developing interest rate gaps rapidly shed receive - fixed swaps and treasuries, and these actions markedly aggravated last summer ’ s long - term interest rate upturn. in recent months, mortgage rates have risen further, suppressing much of what is left of incentives to refinance, thereby increasing mortgage duration to its current elevated level. this suggests that the vast secondary market for home mortgages has largely adjusted to the recent increases in mortgage rates. moreover, the expectation of federal reserve tightening has apparently already induced other significant balance sheet adjustments as well. an unwinding of carry trades is notably under way at least judging from the shift in the trading portfolios of primary dealers. in addition, a swing toward a net short position on ten - year treasury note futures among investors has been the largest since the inception of the contract in the 1980s. * * * economic developments going forward will determine the level and term structure of interest rates. federal funds futures prices already reflect expectations of a substantial firming of policy by the federal open market committee ( fomc ). unlike 1994, there has been an appreciable increase of market rates in anticipation of policy tightening, though history cautions that investors ’ anticipations of the cumulative magnitude of policy actions and their timing under such circumstances are far from perfect. lastly, let me emphasize that recent financial indicators, including rapid growth of the money supply, underscore that the fomc has provided ample liquidity to the financial system that will become increasingly unnecessary over time. the committee is of the view, as you know, that monetary policy accommodation can be removed at a pace that is likely to be measured. that conclusion is based on our current best judgment of how economic and financial forces will evolve in the months and quarters ahead. should that judgment prove misplaced, however, the fomc is prepared to do what is required to fulfill our obligations to achieve the maintenance of price stability so as to ensure maximum sustainable economic growth.