On April 6, 2016, US Federal Deposit Insurance Corporation Chairman Martin J. Gruenberg discussed the consolidation of community banks, noting that while many of the smallest (with assets less than $100 million) have either consolidated or ceased operations, the number of larger community banks (with assets of between $1 billion and $10 billion) has actually increased over the past 30 years. He further noted that approximately 93 percent of FDIC-insured institutions are considered “community banks” and play an important role in providing small loans to farms and businesses and deposit services to communities across the US. However, Gruenberg observed that community banks face many challenges including a decline in net interest margins. He suggested three ways in which the FDIC can help community banks with the challenges they face going forward: (i) tailored supervision; (ii) technical assistance; and (iii) promoting de novo (new) community banks. With respect to tailored supervision, he noted the adjustments in regulations and guidance that account for the size of an institution, including ongoing work to review the rules and regulations as required by the Economic Growth and Regulatory Paperwork Reduction Act, and to examine potential ways to improve Call Reports and simplify reporting requirements. Notably, as a means to encourage the creation of de novo community banks, Chairman Gruenberg announced that the FDIC will reduce the period of heightened supervisory monitoring for de novo institutions from seven to three years. In related actions, the FDIC rescinded its Financial Institutions Letter 50-2009 (Enhanced Supervisory Procedures for Newly Insured FDIC-Supervised Depository Institutions) and issued a supplement to its November 2014 guidance related to its Statement of Policy on Applications for Deposit Insurance.
Chairman Gruenberg’s speech is available at: https://fdic.gov/news/news/speeches/spapr0616.html?source=govdelivery&utm_medium=email&utm_source=govdeliv ery.
The Supplemental Guidance is available at: https://www.fdic.gov/news/news/financial/2016/fil16024.html.