sarah bloom raskin : community bank examination and supervision amid economic recovery speech by ms sarah bloom raskin, member of the board of governors of the federal reserve system, at the maryland bankers association first friday economic outlook forum, baltimore, maryland, 6 january 2012. * * * thank you for the opportunity to speak with you this afternoon. it is always a pleasure to be back in baltimore and to see so many old friends. i was here during the most intense days of the financial crisis, and i will never forget how bankers worked around the clock to ensure that the credit needs of maryland residents and businesses could continue to be met – a dedicated effort that benefited communities across the state. that episode is behind us now, but community banks continue to face numerous challenges, including challenges from an enhanced regulatory regime that has evolved in the wake of the crisis. this regime includes the potential effects of the dodd - frank wall street reform and consumer protection act ( dodd - frank act ). from my many conversations with you, i have a sense of the challenges that you face regarding the changing regulatory landscape. against that backdrop, i appreciate the opportunity to speak at the first friday economic outlook, at the start of a promising new year, and share my thoughts with you on two vitally important topics : how the federal reserve ’ s monetary policy aims to increase the availability of credit to foster economic growth, and how we are tailoring our examination and supervision of community banks to ensure that we are not inadvertently constraining lending. i believe that examination and supervision of community banks is a timely and important topic. why do i say that? because, as i will discuss shortly, lending by community banks plays an important role in the ongoing economic recovery, especially by providing credit to small businesses. and it is absolutely critical that examination and supervision do not produce outcomes that are barriers to small business expansion. unlike most other businesses, banks are subject to a system of examination and supervision, developed over the past century, that has particular and deliberate characteristics : regular on - site visits by specially trained examiners ; exit meetings between examiners and bank senior management to explain examination findings ; written examination reports with narratives and metrics describing the findings of the examiners ; and, if necessary, follow - up on action items that the bank must pursue to remedy specific problems. the ultimate focus of examination and supervision is the safety and soundness of the bank, as well as compliance with laws and an assessment of the bank ’ s ability to withstand risks

, see, for example, https : / / www. federalreserve. gov / monetarypolicy / bst _ openmarketops. htm and https : / / www. federalreserve. gov / monetarypolicy / expiredtools. htm. - 8traditional interest rate tool. in any case, we have a responsibility to thoroughly evaluate what mix of these tools is likely to work best when the next elb episode arrives. perhaps it is time to retire the term “ unconventional ” when referring to tools that were used in the crisis. we know that tools like these are likely to be needed in some form in future elb spells, which we hope will be rare. we now have a significant body of evidence regarding the effectiveness, costs, and risks of these tools, including those used by the fomc and others tried elsewhere. our plans must take advantage of this growing understanding as assessments are refined. the third question concerns improving communication, which i discussed earlier from the standpoint of governance and accountability. but transparency also plays a central role in policy effectiveness through its effects on the expectations of households and businesses. of course, this was the major insight behind the transparency revolution in central banking over the past few decades. today, central banks publicly share a large and ever - increasing amount of information about policy. but policymakers and commentators inside and outside central banks sometimes question whether all of the transparency adds up to effective communication. 14 the fomc ’ s famous dot plot is one example. a focus on the median forecast amounts to emphasizing what the typical fomc participant would do if things go as expected. but we have been living in times characterized by large, frequent, unexpected changes in the underlying structure of the economy. 15 in this environment, the most a 2016 brookings conference titled “ understanding fedspeak ” ( see https : / / www. brookings. edu / events / understanding - fedspeak ) raised several aspects of this issue. for example, olson and wessel ( 2016a ) presented results of a survey of those who follow the fed closely ; in an op - ed ( 2016b ), they noted that “ some 73 percent of academics said fed communications helps the markets ; only 44 percent of private - sector fed watchers agreed. ” for more on changes in the underlying structure of the economy, see powell ( 2018 ). - 9important policy message may be about how the central bank will