Community banks play an important role in the nation’s financial system by complementing the role of large banks. For example, they specialize in relationship banking; they provide credit to small business; and they serve customers in rural and small metro areas. These are the findings of a second quarter Economic Review article published by the Federal Reserve Bank of Kansas City. “The Role of Community Banks in the U.S. Economy” was written by Bank staff, with William Keeton, senior economist, serving as principal author. “Some analysts have questioned whether community banks play a sufficiently important role in the overall economy to warrant public interest and oversight,” Keeton writes. “This article explains why the Federal Reserve has a strong interest in understanding issues facing community banks.” While community banks hold only a small share of the nation’s banking assets, they provide important financial services—for which there are few, if any, substitutes—to some key sectors of the economy. Moreover, community banks will continue to play an important role in the banking industry, even as technology and market conditions change. The second quarter Economic Review also includes “Community Banks and the Federal Reserve,” an article based on a speech given by Bank President Thomas M. Hoenig at the Federal Reserve Bank of Chicago’s recent conference, “Whither the Community Bank?” The speech examined the role community banks play in the Federal Reserve’s mission.
Both articles are available on the Bank’s Web site at
www.kansascityfed.org. # # # Return to www.kansascityfed.org
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