jerome h powell : community banking opening remarks by mr jerome h powell, member of the board of governors of the federal reserve system, at the webinar on “ community banking ”, washington dc, 20 october 2014. * * * thank you for the opportunity to speak with you today about some of the key issues facing community banks. as the chairman of the federal reserve board ’ s community and regional bank subcommittee, i try to meet with groups of community bankers whenever i can to better understand what is on community bankers ’ minds. while today ’ s webinar is no substitute for face - to - face meetings with bankers, it is a special treat to be able to leverage technology to speak to and hear from so many community bankers across the country at the same time. as all of you surely know, community banks play a vital role in the u. s. financial system. community banks have strong links to the people and businesses in their communities, as well as direct knowledge of local economic conditions. these close ties give community bankers a clear advantage in understanding local needs and tailoring their products and services to meet those needs. my colleagues on the federal reserve board and i are committed to making sure that we understand the issues that are most important to community banks as you strive to serve the financial needs of your communities. one way that we further our understanding is by talking to the bankers themselves in a variety of venues, such as this webinar and a community banking research conference that i attended last month in st. louis, which was co - sponsored by the federal reserve system and the conference of state bank supervisors. and there is another opportunity to communicate with the federal reserve and our fellow regulators that i want to make sure you are aware of. the economic growth and regulatory paperwork reduction act ( egrpra ) of 1996 tasked financial regulators with reviewing regulations issued by the agencies at least every 10 years to identify outdated, unnecessary, or unduly burdensome regulations. the agencies kicked off that process earlier this year, and in addition to collecting comments in writing, we are beginning a series of meetings with the public in december. one of the themes that we hear in our interactions with community bankers is concern that the regulatory environment could be tailored more effectively for community banks, and the egrpra process gives all interested parties a voice in identifying areas where regulatory requirements may be disproportionate to risk. i therefore encourage you to participate in this important process and hope you will raise

restraint to be realized, especially on inflation. the economy is also facing headwinds from tighter credit conditions for households and businesses, which are likely to weigh on economic activity, hiring, and inflation. tighter credit conditions are a natural result of tighter monetary policy. but the bank stresses that emerged in march may well lead to a further tightening in credit conditions. the extent of these effects remains uncertain. at our last meeting, the federal open market committee ( fomc ) decided to maintain the target range for the federal funds rate at 5 to 5 - 1 / 4 percent while continuing the 1 / 4 bis - central bankers'speeches process of significantly reducing our securities holdings. we made this decision in light of the distance we have come in tightening policy, the uncertain lags in monetary policy, and the potential headwinds from credit tightening. as noted in the fomc's summary of economic projections, a strong majority of committee participants expect that it will be appropriate to raise interest rates two or more times by the end of the year. 1 when bank stress emerged in march, we acted in concert with other government agencies to address it, enabling the federal deposit insurance corporation to resolve two failed banks in a manner that protected all depositors. we also used our liquidity tools to make funding available to banks that might need it. in addition to our discount window, we established a new facility under our emergency lending authorities, the bank term funding program. our provision of liquidity through these tools supported the stability of the financial system without restricting the use of our monetary policy tools to firm the stance of policy as part of our efforts to reduce inflation. the banking system remains sound and resilient, deposit flows have stabilized, and strains have eased. evolution of the system since the great recession a little more than a decade ago, the global financial crisis required extraordinary interventions by governments around the world. stabilizing the u. s. financial system required coordinated efforts by all parts of the government, including $ 700 billion in taxpayer funds to recapitalize banks, a suite of fed emergency liquidity facilities, as well as government guarantees on bank transaction accounts and money market mutual funds. despite these efforts, the great recession brought misery to countless millions. as the crisis slowly receded, authorities in the u. s. and around the world implemented a host of reforms. the goal was to build a system that could withstand severe shocks, including unanticipated ones that might arrive from any direction