Federal Reserve Board Governor Elizabeth Duke reached out to community banks last Friday at the 2012 Bank Presidents Seminar in Santa Barbara, Calif.
Governor Duke, who spent much of her career in banking, spoke to the California Bankers Association about the increasing government regulations following the U.S. financial crisis.
Legislation such as the Dodd-Frank Act is intended to protect consumers while imposing strict regulations on financial institutions. As a result, smaller community banks have to sort through and adhere to the regulations that, Duke said, often don't apply to them.
“For the most part, the new regulations are directed at the largest institutions, whose failure would pose the greatest risk to the financial system," Duke said. "Even so, the changes are so sweeping that many industry analysts have questioned whether the overall weight of regulation poses a threat to the future of the community bank model."
Duke said that the regulations hinder smaller banks by reducing their ability to provide efficient, flexible financial services to their customers and communities.
“I think we must avoid a one-size-fits-all approach to supervision,” Duke said.
According to Duke, the Board of Governors of the Federal Reserve System is working to include a statement at the beginning of every rule and regulation that specifies which banks will be affected.
“In particular, when issuing supervisory letters, we try to state specifically if and how new guidance will apply to community banks,” Duke said. “This way, banks won't waste resources on requirements that apply to them.”