In recent months, the Conference of State Bank Supervisors (CSBS) and the Federal Reserve Bank of St. Louis (SL Fed) have been collaborating to study the impact of community banking. CSBS is the trade association that represents the state bank chartering authorities nationwide. In Indiana, that organization is the Department of Financial Institutions (DFI), led by Director David Mills, who also serves on the CSBS board of directors. Many of the DFIs across the country, in concert with SL Fed personnel and state banking associations, have hosted meetings of community bankers to address common questions to determine threats, opportunities and the state of the industry in the 21st century. Approximately 40 meetings will be held in 20 states around the United States.
To pull academic research into the results, the collaboration has invited academic white papers for submission. In Indiana, Professor Charles Kelly is leading a team from the University of Southern Indiana to submit a paper on community banking’s impact on small business lending. Professor Kelly attended both of the community banker meetings held in Indiana — one in Evansville and the other in Indianapolis — where DFI staff members took copious notes in order to share details with the CSBS/SL Fed collaboration.
Another meeting is scheduled to take place in St. Louis in early October to discuss the results of the meetings around the country. There also will be presentations on six of the academic submissions selected by the collaboration team.
I had the privilege of attending both of the Indiana community banker meetings. The common threads between these two meetings are not surprising, but certainly instructive. In both meetings, the first 45 minutes were focused almost entirely on the stifling effect that excessive regulatory burden has on community banks of all sizes. During both meetings, 55 minutes were filled before anyone mentioned the effect of unfair competition from tax-favored competitors — credit unions and the Farm Credit System. Little was said about the too-big-to-fail issue.
On the other side of the spectrum, community bankers gave assurances that they would manage to master whatever regulations come before them, but they also emphasized that a moratorium needs to occur to allow them to do what they do best — lift up their communities. They also unanimously expressed that their biggest advantage is their local knowledge. Most believe that they can now use technological advances to their advantage.
The above are broad results from Indiana, and volumes more can be written about all of the issues covered. The collaboration has been a useful experience to this point, and I look forward to additional opportunities to participate. I would also like to extend sincere thanks to DFI Director Mills for his leadership in advancing this project in Indiana.