2  BIS central bankers’ speeches  In contrast, many small banks that turned to a more transactional model and funded construction loans – often outside of their local market – with borrowings, rather than core deposits, failed. And, precisely because of their business model, community banks do have their vulnerabilities.
But the public is unable in most cases to differentiate the excess regulatory capital held for specific purposes from that held for general purposes. This inability is a particular problem under Basel I for those entities with modest credit risk and dominant operating risk.