##standing personal relationships with customers and borrowers. given the important role that community banks play in their local economies, we at the federal reserve are keenly interested in their health and their collective future. local communities, ranging from small towns to urban neighborhoods, are the foundation of the u. s. economy and communities need community banks to help them grow and prosper. as i ’ m sure you are all too aware, the financial crisis and its aftermath have hit some community banks especially hard, and those institutions will continue to need time to repair their balance sheets. although we are not yet where we would like to be, the good news is that many community banks are recovering and reporting stronger performance. indeed, despite some of the worst economic conditions since the great depression and their own strained balance sheets, community banks have already been doing their part to meet the credit needs of their customers, notably including small business customers. we have been spending a lot of time at the federal reserve trying to understand and promote lending to small businesses, and one of the interesting things we have found is that while small business lending contracted overall from mid - 2008 through 2010, this contraction was not bis central bankers ’ speeches uniform. in fact, a majority of the smallest banks ( in this case, those with assets of $ 250 million or less ) actually increased their small business lending during this period. and while banks with assets between $ 250 million and $ 1 billion showed a slight decline in small business lending over this period, the contraction was not nearly as sharp as it was for the largest banks. this hard evidence underscores the important benefits of relationship banking, particularly in periods of unusual economic and financial stress. community banks and the federal reserve you may recall that in my remarks to this group last year, i noted that the decentralized structure of the federal reserve system, with 12 reserve banks and 24 branches located in cities across the country, was designed to ensure that local insights and information would be incorporated in the deliberations of both the board and the federal open market committee. during the debates leading up to the passage of the dodd - frank wall street reform and consumer protection act, we emphasized that our supervisory responsibility for state - chartered banks that are members of the federal reserve system and bank holding companies of all sizes not only provides valuable economic information at the grass - roots level that would be very difficult to replace, it also gives us a fuller picture of the nation ’ s financial system. at the same time, the range

and credit markets. the primary objective of the common monetary policy is price stability. the mandate, clear and unequivocal, given to the european system of central banks is based on two tenets held by the drafters of the treaty : that the stability of the value of money is a public good which does not hinder, but rather fosters, sustainable growth of the real economy ; and that maintaining stability depends crucially on the operation of monetary policy. the european system of central banks will enjoy complete autonomy ; it will regularly provide information on its activities and report on them to the other community institutions. in particular, the european central bank will be required, pursuant to article 109b of the treaty and article 15 of the statute of the european system of central banks, to publish periodic reports on the activities of the escb, with a description of the current and future stance of monetary policy. the european parliament will be able to debate these matters and invite the president and the other members of the executive board of the european central bank to be heard by its competent committees. in particular, the need for a “ single ” monetary policy will have to be reconciled with the principle of “ subsidiarity ”, which has also been embodied in the statute of the escb and is intended to permit the highest possible degree of decentralization in operational terms. more specifically, provision is made for a division of tasks along the following lines : - - the decision - making powers in monetary policy matters, especially with regard to interest rates and compulsory reserves, will be centralized in the european central bank. the ecb will exercise these powers through the governing council, comprising the governors of the national central banks and the executive board, composed of the president, the vice - president and four other members. the executive board will be responsible for implementing the decisions of the governing council on a continuous basis ; the operational implementation of monetary policy will be entrusted to the national central banks. each national central bank will thus have two tasks : it will contribute, through its governor, to the decisions of the governing council ; and it will implement these decisions in its own country. operations in the money and foreign exchange markets will normally be carried out by the national central banks. within this framework, the bank of italy will continue to carry out all the operational functions that it currently performs. the procedures for conducting monetary control operations will be different in part from those used today ; the draft legislative decree currently under discussion in parliament is designed to permit