Michelle W Bowman: Defining a bank

Thank you for the invitation to join you in San Antonio today for the ABA's Conference for Community Bankers. This conference provides an opportunity for bankers, state and federal regulators, and other policymakers to share perspectives on banking and other related financial topics. The ability to exchange ideas is critical to ensuring efficient and effective outcomes in the regulation and supervision of financial services activities. Policymakers should seek to fully understand the direct and indirect consequences of regulation and supervision-and any changes that might be considered to existing expectations. One of the best, and most effective ways to gain this understanding is through direct engagement with bankers, bank customers, and other stakeholders about potential consequences. Engaging with the public, being transparent about policy goals, and hearing from industry participants-enables us to craft more efficient and effective rules and enhance our ability to execute our supervisory responsibilities.

This public engagement is particularly important now, when so many factors are in play that will likely reshape the contours of the banking industry. Bank business models are adapting to technology changes, including new opportunities for third-party partnerships and new risks from increasingly sophisticated cyber criminals. We've seen some traditional banking activities continue to migrate into nonbank financial service providers, and regulators have implemented or proposed-or are considering proposing-significant changes to the bank regulatory framework, some of which could have broad impacts on the future of banking and on our current understanding of the community banking model. A broad range of policymakers continue to consider the root causes of the banking stress from last spring and whether changes are needed to achieve greater resilience and accountability, both among banks and among regulators.

While many of the most significant changes have occurred in the larger bank space, community banks have been and will continue to be affected by these dynamics. Increasingly, community banks must devote a greater proportion of their resources to compliance and risk management. Even those changes that exclude community banks on their face present the prospect of regulatory "trickle down," either through market forces and expectations, or through pressure exerted by bank examiners in the course of supervision.