Fed conducting governance review at community banks

Hot Springs, Arkansas -- US Federal Reserve governor Susan Schmidt Bies has said that, according to several recent studies of corporate governance practices at US banks, those institutions should receive the "equivalent of a grade C with a 'needs improvement' notation".

Bies, who was speaking at the annual convention of the Arkansas Bankers Association in mid-May, noted that while the banking regulator's own review of practices was somewhat more positive, indicating that "a majority of banks are getting the message on the basics of sound governance", many firms still had substantial work to do.

She pointed out that of the community banks with weak or unsatisfactory ratings, 89% experienced serious asset quality problems, while 60% experienced significant