Nonetheless, credit risk concentrations are a critical “franchise” risk for bankers, especially community bankers, and they can assume even greater importance when they involve high-growth lines of business. Successful identification and management of these concentrations requires adherence to good credit fundamentals.
Strong capital ratios - ratios that are well in excess of regulatory minimums have been a key factor in managing credit concentrations and a striking attribute of the most profitable community banks. More generally, the competitive drive to win borrowers should not be allowed to overcome the disciplines of prudent lending practice.