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Bernanke Says Community Banks Face Reduced Opportunities

Federal Reserve Chairman Ben S. Bernanke said U.S. community banks, while playing a “critical role in keeping their local economies vibrant,” confront a shrinking range of profit opportunities.

“They often respond with greater agility to lending requests than their national competitors because of their detailed knowledge of the needs of their customers and their close ties to the communities they serve,” Bernanke said, according to comments released by the Fed today.

A “big concern” for community banks is the “narrowing of the range of profitable lending opportunities,” Bernanke said. Larger rivals leverage their size to gain a pricing advantage in consumer lending, the Fed chief said in a question-and-answer transcript posted on the central bank’s Community Banking Connections website.

Smaller banks had profits that were “considerably higher” last year than in 2010, while “nonperforming assets were lower, provisions for loan losses fell appreciably and capital ratios improved,” Bernanke said.

To contact the reporter on this story: Jeff Kearns in Washington at jkearns3@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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