Bernanke: Community Bankers Face Substantial Challenge

 Econintersect:  Federal Reserve Chairman Ben Bernanke addressed Community Bankers today telling them in part that:

Community banks face substantial challenges in the months and years to come, including still-difficult economic conditions, continued uncertainties in real estate and other key markets, and a changing regulatory environment. But community banks have faced difficult times before, and the industry has remained vibrant and resilient. I am confident that community banking will successfully navigate these new challenges as well. Thank you for what you do every day to meet the needs of your communities and to help our economy grow stronger.

Although no ground breaking statements were made, some interesting observations by Chairman Bernanke on lending by small banks.

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 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.

Source:  Federal Reserve