Conclusion Let me conclude by emphasizing the obvious importance of the quality of macroeconomic policy management to the stability of the financial system. It probably is possible for a country with an exceptionally virtuous fiscal and monetary policy framework to experience a systemic financial crisis. But most financial crises involve a shock whose origins lie in the realm of macroeconomic policy error, often magnified by the toxic combination of poorly designed financial deregulation and an overly generous financial safety net. Probably the most important contribution policy makers can make to financial stability is to avoid large monetary policy mistakes or sustained fiscal and external imbalances that increase the risk of large macroeconomic shocks, and to try to ensure that policy reacts with sufficient speed and force in the face of those shocks we are unable to avoid. BIS Review 55/2004  5
The studies further cited successful community banks as having a strong and localized customer service focus – that is, avoiding the temptation to expand into new, less familiar areas and markets – and high community visibility, with staff members heavily involved in community activities, which in turn, created customer relationships built on trust. 5 So what did we learn from the experience of community banks with the financial crisis? A foundation built on good risk management practices and intimate local knowledge helped the successful banks to thrive during one of this country’s most difficult financial periods. The banks that prosper in the future will likely have characteristics similar to those that outperformed during the financial crisis. It bears repeating that community banks are critical in keeping local economies vibrant and growing. Strong community banks are essential to the provision of credit to small businesses in their localities. 4  See United States Government Accountability Office, Financial Institutions: Causes and Consequences of Recent Community Bank Failures, Statement of Lawrance L. Evans, Jr., Director Financial Markets and Community Investment, June 13, 2013. Also see Gilbert et al. (2013). 5  St. Louis Federal Reserve Study Shows Community Bank Model Can Thrive in Good Times and in Bad. BIS central bankers’ speeches  3  Importance of small business lending It is often noted that small businesses contribute disproportionately to employment growth in their communities. When you dig a little deeper into this stylized fact, you discover that it is new small businesses that are responsible for this growth.