Martin Neil Baily and Nicholas Montalbano of Brookings recently published a paper on the role of community banks in local economic development and small business lending.\u00c2\u00a0 The authors find that despite concerns about the long-term survival of community banks due a decline in the number of banks and increased Dodd-Frank regulations, they continue to recover from the financial crisis and are in fact out-performing the Big Four banks in several key measures.<\/p>
The paper leverages the FDIC community bank definition which was first established in the groundbreaking 2012\u00c2\u00a0FDIC Community Bank Research Study<\/a>\u00c2\u00a0to evaluate the financial performance of community banks .\u00c2\u00a0Unfortunately the authors conclude that the significant decline in the number of very small banks has had a limited impact, because these banks\u00c2\u00a0represent such a “tiny part” of the sector.\u00c2\u00a0 What the authors fail to recognize is the significant role that small community banks play\u00c2\u00a0in the communities in which they operate.<\/p> It is great to see\u00c2\u00a0research on community banking to help\u00c2\u00a0develop a better understanding of the industry. Overall the paper is worth the read, but keep in mind that the loss of a small community bank, while insignificant to the broader financial sector, is a tremendous loss to the community which it serves.\u00c2\u00a0 The paper may be found here:\u00c2\u00a0 The community banks: The evolution of the financial sector, Part III<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Martin Neil Baily and Nicholas Montalbano of Brookings recently published a paper on the role of community banks in local economic development and small business lending.\u00c2\u00a0 The authors find that despite concerns about the long-term survival of community banks due … Continue reading