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5 Common Challenges of Local Community Banks


The Bank Secrecy Act (BSA), Gramm-Leach-Bliley Act (GLBA), Dodd-Frank Wall Street Reform and Consumer Protection Act, the Basel Accords (especially Basel III) and other legislation has increased the cost of lending and impedes local community banks capabilities.

Working Capital

Basel III regulations mandate banks hold 4.5% of common equity and 6% of Tier I capital for operations which decreases a bank’s working capital. Together with increased costs to secure funds, binding liquidity and new leverage requirements local community banks have less to lend.


All banks are concern about NIM (net interest margin). Reduced NIM is directly affected by decreased loan demand which is attributed to a poor economy and a weak real estate market.


All banks need to continually invest in their digital infrastructure. This includes integrating multiple platforms, cyber-security, online, mobile banking, mobile apps, cloud computing and maintaining a strong social media presence.

Non-bank Competitors

Online loan companies, credit cards, retailers, hardware and software companies, and other corporate institutions are in the lending business. They are offering very competitive interest rates, an easier and faster application processes and becoming an acceptable alternative to banks.

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