and supervision of community banks to achieve those aims. tiered regulation for community banks there are two complementary ways to implement a tiered approach to prudential regulation. one is to apply specific regulations only to those classes of banking organizations whose activities and scale require those measures. the second is to tailor the application of generally applicable measures based on the size, complexity, and possibly other characteristics of banking organizations. we are following both approaches in putting into place an explicitly tiered method of regulating community banks. 8 an example of tailoring generally applicable regulations is the revised capital guidelines that were issued in 2013. 9 it was clear in the wake of the financial crisis that strong capital positions were essential for banks of all sizes, including community banks. but a number of changes that were appropriate for large banks did not make sense for community banks. as i counties that experience failures of community banks are likely to see significantly lower income and compensation growth, higher poverty rates, and lower employment. see john kandrac ( 2013 ), “ bank failure, relationship lending, and local economic performance ( pdf ). ” while not directly the subject of these remarks, it also bears noting that additional tiering of expectations is increasingly taking place even among larger banking organizations. for example, capital planning and stress testing requirements are more extensive for the very largest, most systemically important firms than they are for smaller regional banking organizations. likewise, liquidity and capital requirements are or will be higher for the most systemically important firms than for other large banking organizations. see federal deposit insurance corporation ( fdic ) ( 2013 ), “ regulatory capital rules : regulatory capital, implementation of basel iii, capital adequacy, transition provisions, prompt corrective action, standardized approach for risk - weighted assets, market discipline and disclosure requirements, advanced approaches risk - based capital rule, and market risk capital rule ( pdf ), ” interim final rule, federal register, vol. 78, pp. 55340 – 55598 ; and board of governors of the federal reserve system ( board of governors ) and office of the comptroller of the currency ( occ ) ( 2013 ), final rule of the same name ( pdf ), federal register, vol. 78, pp. 62017 – 62291. bis central bankers ’ speeches am sure you all recall, community banks gave us quite a bit of help in identifying which portions of the originally proposed rule were, and were not, appropriate for community banks. following publication of the final

statutory provisions to carve out their applicability to community banks. i have previously suggested two candidates for consideration : the volcker rule and the incentive compensation requirements in section 956 of dodd - frank. 15 the risks addressed by board of governors, fdic, and occ ( 2013 ), new capital rule : community bank guide ( pdf ) ( washington : board of governors, fdic, and occ, july ). board of governors, fdic, and occ ( 2014 ), “ federal bank regulatory agencies seek comment on interagency effort to reduce regulatory burden, ” press release, june 4. see also the federal financial institutions examination council ’ s ( ffiec ) egrpra website at http : / / egrpra. ffiec. gov /. see http : / / egrpra. ffiec. gov /. for more information about large - bank capital planning and stress testing requirements, see the board ’ s website at www. federalreserve. gov / bankinforeg / stress - tests - capital - planning. htm. board of governors, occ, and fdic ( 2014 ), “ liquidity coverage ratio : liquidity risk measurement standards ( pdf ), ” final rule, federal register, vol. 79 ( october 10 ), pp. 61439 – 61541. the volcker rule applies to all banking entities that engage in prohibited activities, irrespective of size, and the dodd - frank incentive compensation requirements apply to all banks and holding companies with total assets of $ 1billion or more. bis central bankers ’ speeches these statutory provisions are far more significant at larger institutions than they are at community banks. 16 moreover, in the unlikely event that a community bank engages in practices in either of these areas that raise heightened concerns, we would be able to address these concerns as part of the normal safety - and - soundness supervisory process. while the banking agencies have used the other method of tiering and tried to tailor the volcker rule ( as we will do with section 956 ), i believe that both community banks and supervisors would benefit from not having to focus on formal compliance with regulation of matters that are unlikely to pose problems at smaller banks. today i would like to add a third candidate for consideration – a statutory amendment that would permit the federal reserve board to raise the size of banks covered by our small bank holding company policy statement. 17 as background, the board originally