Michelle W Bowman: Challenges to the community banking model

Speech by Ms Michelle W Bowman, Member of the Board of Governors of the Federal Reserve System, at the 18th Annual Community Bankers Symposium "Community Banking: Navigating a Changing Landscape", Chicago, Illinois, 11 October 2024.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
14 October 2024

Good afternoon, I'd like to begin by thanking the event organizers, including our staff at the Chicago Federal Reserve Bank, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency, and the Conference of State Bank Supervisors for inviting me to share my thoughts with you at the 18th Annual Community Bankers Symposium. I always enjoy the opportunity to speak to bankers across the country and share perspectives on the issues facing the banking and financial system, especially when it's related to community banks.

Banks are a critical component of the U.S. economy. Their work often extends well beyond the provision of credit- providing services and volunteer and financial support within their community. Among many things, banks offer financial education, sponsorships and funding for community programs and events. Without question, community banks are important and integral to the local economy.

But community banks also face challenges that require proactive risk management, effective and efficient prioritization of compliance resources, and the need to innovate. Today, I would like to briefly highlight some of the issues banks are facing and discuss ways that community banks and regulators can more effectively work together in the future.

The Challenges Facing Community Banks

As this audience knows well, community banks face a number of challenges. They often rely on third-party service providers to offer products and services to their customers. It may be more difficult for them to hire and retain qualified staff or plan for future leadership with management succession planning. Given limited staffing, they may be overwhelmed by the recent onslaught of new regulations and guidance. And in light of all of this, it may be challenging to prioritize resources in order to appropriately focus on the most important risks facing their businesses. While the headwinds may seem overwhelming, community banks are always resilient in the face of change.