the forces that may cause it to depreciate. since the new york fed began to highlight the need for a focus on culture reform in financial services, measurement has consistently been raised as a challenge. while measuring culture may not be as straightforward as measurement approaches for more traditional assets and risks, it is possible to gain valuable insights through a multi - layered and patient approach. through the use of surveys, interviews, focus groups, behavioral analytics, network analyses, and board effectiveness assessments, firms can triangulate from multiple inputs and develop a view of how high or low their cultural capital is, both in an absolute and relative sense. at a 2017 conference, hosted by the new york fed, representatives from across the industry came together to discuss how boards of directors assess their firms ’ cultures, hold management accountable, the benefits of data and benchmarking, and finally, the role of performance management and incentives. 4 since then, several firms have started to use big data to perform network analysis to understand how culture is transmitted through an organization. others have further honed their ability to gather qualitative data and interpret it in new ways. there is a greater recognition that there are no simple and straightforward metrics to tell them where they stand vis - a - vis cultural capital. 5 rather, these firms are regularly experimenting with new ways to identify patterns within complex systems that are continuously evolving. a number of firms have recognized that the data they gather must be contextualized. cultural capital is not a single statistic ; one part of a firm could have generous stores of it, while another department or geography requires more focused investment and attention. from the accumulation perspective, building cultural capital means investing in the way the organization approaches everything it does, including defining its purpose, setting its business strategy and risk appetite, training, communications, decision - making, prioritization, compensation practices, and how employees are incented to interact with colleagues, clients, and customers. a critical part of sustained investment is that business leaders and boards of directors see it as their responsibility to set the tone from the top. modelling the desired behaviors sets a powerful example and serves as a form of behavioral risk mitigation. all of these actions reflect choices that a firm makes, either implicitly or explicitly, that can build cultural capital. on the other hand, cultural capital can also decline or deteriorate as a result of internal choices. for example, overt incidences of misconduct such as a trading scandal or a legal

william c dudley : welcoming remarks at the community bankers conference remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york, at the community bankers conference, federal reserve bank of new york, new york city, 18 april 2018. * * * thank you for joining us today for our 16th annual community bankers conference. this is my last opportunity to address this fine group of community bank leaders in my role as president of the new york fed. as always, what i have to say reflects my own views and not necessarily those of the federal open market committee ( fomc ) or the federal reserve system. 1 since becoming head of the new york fed in 2009, i have had the opportunity to watch the evolution of community banking up close. i observed the resilience of community banks at the height of the financial crisis and how your organizations managed during those turbulent times. i also have had the privilege of meeting with many of you during my regional visits, and i remain impressed with how small banks remain important pillars of economic support for their communities. the past decade has seen significant change for your industry. there has been significant consolidation among institutions and the remaining community banks are much healthier. back in 2009, there were 191 community banks in the second district with an aggregate of $ 223 billion in total assets. in contrast, there are 135 community banks today. despite this contraction in number, the remaining firms have continued to grow and thrive, and now have assets totaling $ 291 billion, which is an increase of about 30 percent. community banks are much stronger financially today. in 2009, troubled assets were 26 percent of capital, primarily reflecting a large volume of construction lending. that ratio has declined significantly, to 8. 5 percent today — demonstrating that community bank leaders have the capacity to take action, effectively work out troubled assets, and generate capital. these data tell a welcome story regarding your ability to successfully conduct business through the economic recovery. so, where does the industry go from here and what challenges lie ahead? that is the theme of today ’ s conference, and i expect a robust and enlightening series of discussions from both panelists and presenters. from my perspective, there are two challenges that i would highlight : ongoing advances in technology, and interest rate risk. first, major technological changes are compelling banks to embrace technology to better meet the needs of their customers. today ’ s customer expects increased digital access, and a bank ’ s failure to advance technologically would