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Opinion: Reducing red tape improves community bank service

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Every day, banks facilitate the flow of money throughout the United States and around the world. Online and mobile transactions, which are increasingly important to our economy, would not exist without the electronic payment infrastructures in banks. Customers put their trust and confidence in a secure system each time they make credit and debit transactions. Without these payment systems, national and global economies could not function.

According to the Federal Deposit Insurance Corp., 16.3 million people would have limited or no physical access to mainstream banking services without the presence of community banks. As the only physical banking presence in nearly one in five counties in the U.S., community banks are a financial lifeline to many American families.

During the past several years, these community banks have been instrumental in helping people recover from the financial crisis that has hampered the economy. Community banks are highly capitalized, so they are better prepared than their larger competitors for economic crises. Since they are local institutions, they reinvest in their communities and channel loans to their depositors’ neighborhoods. This promotes localized growth that contributes to the broader global economy.

According to the Missouri Bankers Association, more than 25 percent of investment spending in Missouri is attributed to loans made by community banks. Unfortunately, one-size-fits-all regulatory policies are hindering community banks from fully serving their local communities and supporting a stronger economic expansion. By reducing administrative requirements and regulatory red tape on these institutions, policymakers can help reduce restrictions, allowing community banks to increase lending and economic growth at the local level.

Here are other factors currently contributing to the success of community banks:

• Community banks are an integral part of the community, working with local families, businesses, schools and agricultural producers to create financial opportunities and help them plan for their future.

• Community banks are passionate about the local economies they serve. They are thankful for the opportunity to provide financial tools to their customers to ensure their success but in a way that highlights the importance of personal connections. They also create jobs for their communities and generate returns for their stockholders, thus contributing to the local economic growth.

• Community banks make charitable grants to local organizations. They are often the first institutions to which communities turn when there is a social need. Whether it is support for the elderly, the poor or to help the environment, community banks step up to the challenge.

• Community banks play an important role in the financial system of the economy. They complement the role of large banks by specializing in relationship banking and providing credit to small businesses – a sector that is arguably underserved by large banks. A recent study conducted by seven Federal Reserve banks found small businesses that applied for loans with community banks were considered to be the most successful and the most satisfied with their borrowing experience compared with credit unions, large banks and online lenders.

The combination of business loans, housing loans, banking services and charitable donations makes community banks a local advocate that helps the community access the resources needed to achieve financial goals. When a customer works with a community bank, they can trust that their banker has a vested interest in their success, creating peace of mind.

Given the importance of community banks to the economy, the Federal Reserve has a strong interest in understanding issues that challenge these financial institutions. The Federal Reserve’s monetary policy requires clarity on how its policy actions affect community banks and their customers.

After years of mild economic expansion, policymakers have made stronger economic growth and investment top priorities. Recognizing the economic benefits of community banks, government officials are working to advance policies designed to free community banks from excessive government regulations designed for much larger banks. Increasing the economic impact of community banks is expected to produce a lasting benefit to the national and global economies.

As our nation continues to recover from the fallout of the financial crisis, releasing the economic power of community banks would produce an immediate and practical benefit for the global economy and help include more Americans left behind by our nation’s recovery.

Chandler Johnston is a regional branch sales manager for Arvest Bank in Springfield. She can be contacted at cjohnston1@arvest.com.

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