Public Affairs Update | By Stephen W. Rice
The “Money” column in Consumer Reports’ November 2013 issue was entitled “Dump Your Big Bank and Save.” The column urged consumers to consider using “credit unions, regional banks, virtual banks and prepaid cards” as four alternatives to using large banks. To our surprise, the column made no mention whatsoever of the approximately 7,000 community banks across the country.
We certainly believe that our financial system offers consumers a myriad of choices, and that there is an appropriate role for many different types of institutions. However, we also strongly believe that community banks are also an important option – one that should never be ignored or overlooked.
In New York state, we have nearly 170 local independent community banks that are widely recognized for our performance, products and services, and for meeting the housing, small business and consumer needs of our customers and communities. Many have been doing so for more than two centuries, in towns, villages and cities all across the state.
Earlier this year, the New York State Department of Financial Services (DFS), which oversees and regulates commercial banks, thrifts, credit unions and many other types of financial institutions, released a comprehensive report on community banking in the state. Significantly, the DFS made clear that community banks continued to lend to homeowners and small businesses during the financial crisis, as larger banks pulled back.
They also found community banks provide most of the loans for New York’s small businesses and farms. Even though we have less than a quarter of all bank assets in the state and compete against much larger institutions, we generate more than half of all small business loans and nearly all the small farm loans in the state! Many community banks also traditionally hold on to, and service, the real estate loans they make, rather than originating them and then selling them off to mortgage loan servicers.
In releasing its report, DFS Superintendent Benjamin Lawsky stated: “Community banks focus on the unique needs of their communities. They build strong customer relationships which help attract local retail deposits. These banks take deposits from their communities and then typically recycle them back into their communities in the form of loans.” Governor Andrew Cuomo added: “Community banks represent a strong economic engine that drives growth in New York and their performance is remarkable. Small business is the engine of job growth and most small business loans come not from the big national banks, but from community banks.”
Community banks continue to lend throughout the markets we know and understand so well, and we remain committed to the future of our local consumers, small businesses and farmers. With locally based ownership and a commitment to our customers and neighborhoods, we are extremely close to the pulse of our communities.
The fact is, in communities all across New York and the country, we truly are the backbone and lifeblood of our communities. And, we are an option that should never be
Steve Rice coordinates government relations and communications for the Independent Bankers Association of New York State. He has worked in the New York banking industry and New York state government for more than three decades.