JOHNSON STATEMENT ON COMMUNITY BANK HEARING

WASHINGTON – Today, Senate Banking Committee Chairman Tim Johnson (D-SD) held a hearing titled “Lessons Learned From the Financial Crisis Regarding Community Banks.”

 

“Today we will discuss three recent studies on community banks.  The GAO’s study, “Causes and Consequences of Recent Bank Failures,” the FDIC Inspector General’s “Comprehensive Study on the Impact of the Failure of Insured Depository Institutions,” and the “FDIC Community Banking Study.” 

 

“Between January 2008 and December 2011, 414 insured U.S. banks failed.  Of these, 353 were depository institutions with less than $1 billion in assets.   Despite these failures, over 7,000 small financial institutions survived.  We know that community banks did not cause the financial crisis, but many were casualties of the Great Recession that followed.

 

“Community banks entered the crisis with strong capital, and despite weakening earnings, most of them remained well capitalized through the crisis.  However, some banks saw an increase in non-performing loans and a decrease in income that strained their capital levels.

 

“I look forward to today’s witnesses’ testimony.  The FDIC, GAO and FDIC IG have taken important steps to analyze the impact of the financial crisis on community banks.  Specifically, the GAO and IG studies looked at the factors that contributed to the bank failures during this period.  All three studies have provided lessons learned from the crisis regarding community banks, and have made recommendations that would strengthen the community bank model and improve regulation and supervision.    

 

“Since community banks play such a vital role in so many cities and towns of all sizes, including many in my home state of South Dakota, it is important for this Committee to explore major trends affecting community banks and lessons learned from the financial crisis. 

 

“It is my hope that this Committee can find consensus on ways to strengthen community banks and the communities they serve without undermining safety and soundness regulation or consumer protection.”

 

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