susan schmidt bies : community banks - a regulatory update remarks by ms susan schmidt bies, member of the board of governors of the us federal reserve system, at the american bankers association chief financial officers exchange conference, chicago, 7 june 2005. * * * i would like to thank the american bankers association for inviting me to participate in this conference. after a brief overview of the current state of the nation's community banks, i will discuss three issues that federal reserve supervisors are thinking a lot about and that i know are of great interest to community bankers : credit risk, particularly in real estate ; compliance with the bank secrecy act ; and, potential revisions to the current minimum regulatory capital requirements for community banks. state of the industry when i look at the u. s. banking system today, i see two divergent trends. on the one hand, the majority of banking assets are increasingly concentrated in a small number of large complex banking organizations that operate across wide geographic regions and diverse business lines. on the other hand, thousands of smaller institutions still focus on local communities or regions, providing invaluable services and promoting healthy competition across the nation. in fact, despite the much - touted consolidation in the banking industry and the high levels of competition in many markets, there are more than 8, 000 banks in this country, and close to 90 percent of those institutions have less than $ 1 billion in assets. entrepreneurs still seem to see prospects in the sector. over the past five years, two new de novo charters have been approved for every five bank mergers. this tradition of locally oriented banks makes this country unusual among developed nations and, i believe, contributes significantly to our financial diversity and economic resilience. small banks also continue to provide valuable sources of funding for small businesses within their local communities. if you look at their balance sheets and income statements, you will see that community banks are thriving. capital, earnings, and asset quality are improving for banks of all sizes, but particularly for community banks. in 2004, nonperforming assets, net charge - offs, and loan - loss provisions for community banks were at long - term lows. high returns on equity - just less than 12 percent for community banks - and a steady flow of new bank charter applications and approvals suggest that banking has been and remains a profitable industry. the continuing strength of the financial sector is also visible in supervisory ratings. at year - end 2004, less than 1 percent of community banks nationwide were rated below

dollar swap window for psu oil companies, a concessional swap window for foreign currency nonresident ( fcnr - b ) deposits, increased overseas borrowing limits of banks, enhanced foreign investment limits in government debt and restrictions on outward investment flows, liberalised remittance scheme ( lrs ) entitlements as well as exchange - traded derivatives. 12. the outbreak of the covid - 19 pandemic in march 2020 necessitated swift and focussed policy responses to address the emerging or potential market dislocations. as in the past, policy rates were reduced and systemic liquidity was expanded. but, this time, the policy corridor was asymmetrically widened and the fixed rate reverse repo became the effective anchor for the evolution of short and longer5 term interest rates. to improve transmission of policy rates and ensure flow of credit to the affected sectors, unconventional measures were used viz., the long - term repo operations ( ltros ), targeted ltros and special refinance facilities to all india financial institutions. a special liquidity facility for mutual funds aimed at assuaging redemption pressures was also instituted. for the first time, the reserve bank pledged its balance sheet to revive the economy through a government securities acquisition programme ( g - sap ) which provided an upfront commitment on the amounts to be purchased. special open market operations involving simultaneous purchase and sale of securities ( operation twist ) were undertaken for orderly evolution of the yield curve and liquidity management. forward guidance gained prominence with the emergence of time and state - contingent guidance, with assurances on the reserve bank ’ s commitment to maintain congenial financial conditions. communication became a significant part of our monetary policy toolkit. 13. the onset of the war in ukraine again weakened risk sentiment, with commodity prices and inflation rising to multi - decade highs. as major central banks accelerated policy rate hikes and tightened liquidity to tackle inflationary pressures, financial market volatility spiralled, and the rupee came under considerable pressure. the policy response this time eschewed administrative measures to contain outflows and instead focused on measures to enhance inflows through incentivising non - resident deposits, foreign investments in debt instruments and ecbs. to promote exports and support the increasing global interest in the rupee, an additional arrangement for invoicing, payment and settlement of exports / imports in rupees was put in place. 14. the point i want to emphasise here is that while