interest margins for community banks are, on average, higher than those for larger banks, and recently this difference has been widening. and, as a result of stable interest margins and improved cost controls, the return on assets ( roa ) for community banks as a whole has remained well above industry standards for strong performance. looking at other performance measures, we see that loan quality and capital ratios remain strong at community banks. on average, their nonperforming - loan - to - asset ratios have been low and comparable to those of the largest banking organizations, and their capital ratios have remained high. in addition, community banks continue to demonstrate a healthy ability to attract deposits, with core deposits funding about 70 percent of assets as of year - end 2005. community banks and small businesses the thesis that i have put forward – namely, that relationship finance is important in sustaining the role that community banks play and in accounting for their strong performance – has a number of implications for small businesses ’ use of community banks and the proximity of banks and their customers. the board ’ s survey of small business finances gives us a window on the relationship between community banks and small businesses and the evolution of the banks ’ role. the survey data are also helpful in contrasting the characteristics of small businesses that use community banks with those of small businesses that use larger depository institutions. by way of background, the board conducts the small - business survey every five years. our most recent data are for year - end 2003 and were obtained from interviews conducted during 2004 with more than 4, 200 small businesses, a representative sample drawn from more than 6. 3 million small enterprises in the united states. the data were made available to the public in june 2006, but to my knowledge no one has yet used them to assess the role that community banks play in small - business finance. not surprisingly, the vast majority of small businesses obtained some type of financial service from a bank or thrift in both 1998 and 2003. over that period, the share of small businesses obtaining services from nondepository institutions increased substantially, from about 40 percent of firms in 1998 to about 54 percent in 2003. nondepository sources typically supply loans and financial management products, including such services as check clearing, provision of letters of credit, cash management, and credit card processing. although the fraction of small businesses obtaining these types of services from nondepositories has increased, the proportion obtaining them from banks increased as well. both of these changes reflect the

analyze and understand today's financial innovations and evaluate their implications for welfare and policy. this year's workshop continues in that innovative spirit, keeping an eye on the future of money and banking. the papers to be presented span areas including decentralized ledgers, exchanges for crypto assets, and the impact of certain protocols on financial stability. researching these new technologies helps us deepen our understanding of the implications for the broader financial system. an important point to remember this week is that no single field of study can give the answers to all of the big questions we face relating to the evolution of money and banking. commingling of insights and techniques from monetary theory, finance theory, and other fields is vital in studying the complex interactions of modern financial systems. of course, it is also important to test our theories with available data, and many papers we will see this week deliver on that count as well. without further ado, let's get started. i hope you have a great week of engaging discussions, and i'm sure we will learn a lot from this year's workshop. 2 / 3 bis - central bankers'speeches 1 the views expressed here are my own and are not necessarily those of my colleagues on the federal reserve board or the federal open market committee. 3 / 3 bis - central bankers'speeches