ben s bernanke : community banking speech by mr ben s bernanke, chairman of the board of governors of the federal reserve system, at the future of community banking conference, sponsored by the federal deposit insurance corporation, arlington, virginia, 16 february 2012. * * * it is a pleasure to speak at the federal deposit insurance corporation ’ s ( fdic ) conference on the future of community banking. this conference is indeed an important and timely one. community banks make a critical contribution to the prosperity of both their localities and the nation as a whole, which is why we at the federal reserve and the other banking agencies are acutely interested in their long - term strength and viability. 1 today i will discuss the role community banking organizations play in supporting the health of our economy, as well as some of the challenges they face. because we greatly value our ongoing dialogue with community banks, i will also speak about the federal reserve ’ s efforts to improve our understanding of the pressures affecting community banks and to foster constructive supervisory relationships. the role of community banks in a challenging economy although community banks provide a wide range of services for their customers, their primary activities revolve around the traditional banking model – specifically, taking shortterm deposits to fund longer - term investments, such as small business, agricultural, or commercial real estate loans. accordingly, risks at community banks tend to arise from their lending, in the form of credit risk, interest rate risk, or concentration risk, rather than from the trading, market - making, and investment banking activities associated with the largest banks. however, by taking on and managing the risks of local lending, which larger banks may be unwilling or unable to do, community banks help keep their local economies vibrant and growing. importantly, community banks are well positioned to go beyond the standardized credit models used by larger banks and consider a range of factors when making credit decisions. in particular, they often respond with greater agility to lending requests than their national competitors because of their detailed knowledge of the needs of their customers and their close ties to the communities they serve. while community banks have certain natural advantages, they also face an array of challenges, stemming from both the current economy and, to some extent, from their business model. the close ties of community banks to local economies is a source of strength, as i mentioned, but those close linkages have drawbacks as well, most notably the resulting concentration of exposures to those same local economies. strong community banks take measures

by the alternative reference rates committee, new york, ny ( via webcast ), march 22, 2021 ), https : / / www. federalreserve. gov / newsevents / speech / quarles20210322a. htm ; see also mark van der weide, “ the end of libor : transitioning to an alternative interest rate calculation for mortgages, student loans, business borrowing, and other financial products ” ( testimony before the subcommittee on investor protection, entrepreneurship, and capital markets, committee on financial services, u. s. house of representatives, washington, d. c., april 15, 2021 ), https : / / www. federalreserve. gov / newsevents / testimony / vanderweide20210415a. htm. thucydides, the history of the peloponnesian war, translated by richard crawley, at ch. 3, https : / / www. gutenberg. org / files / 7142 / 7142 - h / 7142 - h. htm.