bis central bankers ’ speeches i believe bankers come to fully understand supervisory expectations over time, as their experience grows. but when something radically changes the supervisory landscape such as new regulations, drastic changes in the economic environment, or reassignment of regulatory authority, more direct outreach might be needed. for many years, the reserve banks have maintained local training and outreach programs for banks in their districts. for instance, the popular “ ask the fed ” calls conducted by the federal reserve bank of st. louis provide bankers with an opportunity to hear federal reserve staff discuss recent policy initiatives and to be updated on the most common problems that examiners see in the field. the calls also provide an informal setting for bankers to ask questions on issues of concern. in addition, consumer compliance webinars have provided a forum for the federal reserve to discuss emerging consumer compliance issues and to answer questions from webinar participants directly. 3 these initiatives have been so successful that a planning group is studying options for leveraging these efforts in a coordinated, national initiative to improve communication of relevant information to community banks supervised by the federal reserve. despite all efforts to communicate supervisory expectations, there are inevitably disagreements between banks and their examiners about examination findings. the federal reserve ombudsman actively works with banks that have concerns about their examinations or that wish to appeal an examination finding. the ombudsman works independently from the bank supervision chain of command and has broad authority to mediate complaints, including the authority to refer matters to committees of the board. the ombudsman ’ s office also has a follow - up program in place to protect the banks that contact it from retaliation. and the ombudsman tracks the nature and source of complaints in order to identify potential systemic problems. 4 balancing safety and soundness with credit availability since 2008, many banks have seen their assets ’ quality criticized and their ratings downgraded. this is not surprising given the severity of the economic downturn and the effect it had on the quality of bank assets. however, some bankers complain that examiners also tightened their approach. indeed, we repeatedly hear that fear of examiner criticism is one of the reasons banks hesitate to lend to small businesses. we take these concerns seriously. in response, we are actively communicating with examiners and have stepped up examiner training to ensure that supervision in the field is consistent with policy. at the same time, i think it is important to continually reevaluate our supervisory policies and procedures to ensure that the policies themselves are

elizabeth a duke : opportunities to reduce regulatory burden and improve credit availability speech by ms elizabeth a duke, member of the board of governors of the federal reserve system, at the 2012 bank presidents seminar, california bankers association, santa barbara, california, 13 january 2012. * * * it ’ s a pleasure to be here this morning to address the 2012 california bankers association bank presidents seminar. before joining the federal reserve, i spent most of my career in banking, much of it as president of a community bank. so i know how important these conferences can be as you try to meet the expectations of regulators, customers, employees, communities, and shareholders – and to do so safely and profitably – with limited resources. for more than three years now i have viewed banking from a different perspective, as a regulator whose primary concerns are the safety and soundness of the banking system and consumer protection. three years may sound brief, but i think that the intensity of my tenure more than offsets its relatively short duration. i arrived at the federal reserve in 2008, just in time to serve on the front lines of the combat against the collapse of our financial system. i witnessed first - hand the damage that can result from reckless lending and weak riskmanagement practices. as we all know, fallout from the crisis was not limited to those who engaged in the activities that were at the center of the problem. indeed, as the crisis developed, conditions deteriorated so severely that many banks that had been considered financially strong, that had never made a single sub - prime loan, found themselves struggling for survival. this was particularly the case for banks in states like california that were most heavily impacted by a sharp deterioration in real estate markets and a significant increase in unemployment. community bankers ’ efforts to address the asset quality problems that followed have been crucial to recovery. we are just now starting to reap the benefits of those efforts and are seeing some improvement in community banks in california and across the country. but while the effects of the economic crisis are receding, bankers are now facing a wave of increased regulatory requirements. for the most part, the new regulations are directed at the largest institutions, whose failure would pose the greatest risk to the financial system, or at the lending practices that led to the crisis. even so, the changes are so sweeping that many industry analysts have questioned whether the overall weight of regulation poses a threat to the future of the community bank model. i do believe in the community bank model and its future. indeed,