, liquidity, and risk management – apply only, or principally, to the largest, most complex, and internationally active banks. these new standards are not meant to apply to, and clearly would not be appropriate for, community banks. we will work to maintain a clear distinction between community banks and larger institutions in the application of new regulations. conclusion to conclude, i would like to reemphasize the importance that my colleagues on the board and i place on the federal reserve ’ s relationship with community banks. the fed is committed to fair, consistent, and informed examinations that take into account the size, complexity, and individual circumstances of each bank we oversee. we will do all we can to support the banks ’ safety and soundness and eliminate unnecessary costs. despite economic uncertainties, the condition of community banks is improving. that ’ s good news not only for banks, but for their communities and the national economy as well. thanks, and enjoy the rest of your meetings. bis central bankers ’ speeches

the most part, community banks appear to be meeting their challenges. profits of smaller banks were considerably higher in 2011 than in the previous year, nonperforming assets were lower, provisions for loan losses fell appreciably, and capital ratios improved. outreach and communication with community banks as i noted, together with economic conditions, regulation and supervision are among the top concerns for community banks. in that regard, i think we would all agree that two - way communication between regulators and community banks is critical. banks need to understand supervisors ’ policies and expectations, but supervisors must also listen to and understand banks ’ concerns. bis central bankers ’ speeches at the federal reserve, we pursue our dialogue with community bankers through many channels. one important channel is the recently established community depository institutions advisory council ( cdiac ). 1 the council ’ s membership is drawn from smaller banks, credit unions, and savings associations. each of the 12 reserve banks around the country has a local advisory council, and one representative from each local council serves on the national council that meets with the board in washington twice a year. at a recent meeting, for example, one of our cdiac members asked us to be clearer about whether particular rules and guidance apply to community banks. having heard from this banker as well as others, we are now working to more explicitly indicate which banks will be affected when we issue new regulatory proposals, final rules, or regulatory guidance. although this change seems relatively simple, we hope it will help banks avoid allocating precious resources to poring over supervisory guidance that does not apply to them. in addition to the advisory council, the board last year established a supervision subcommittee on smaller regional and community banking. because of their professional backgrounds in community banking and bank supervision, i asked governors elizabeth duke and sarah bloom raskin to serve on this subcommittee. its primary role is to improve our understanding of community and regional banking conditions and to review policy proposals for their potential effect on the safety and soundness of, and the regulatory costs imposed on, community and regional institutions. 2 governors duke and raskin are also keenly interested in how our policies could affect the availability of credit to sound borrowers. we have other contacts with community banks that have proved valuable. for quite a few years, the reserve banks have maintained local training and outreach programs for banks. more recently, several of these programs have been expanded nationally. for example, the federal reserve bank of st. louis organizes national “ ask the fed ” calls to provide