Managing Concentration Risk: A Community Bank Perspective

Community banks are almost by definition less diversified than their larger brethren. The geographic dimension overlaid on any industry can be dangerous and challenging. Whatever ails businesses and households in one part of the local market may well ail others. Because geographic concentration is a fact of life for a community bank, it tends not to get as much attention as commercial real estate (CRE) and other sources of concentration risk.
But it should, and well consider here some more proactive measures that can be taken to address it, beyond the more passive (though certainly important) monitoring and reporting activities. In directing our comments more to a community bank, we are sensitive to the various constraints facing such an institution in regard to budget, data, MIS, in-house expertise, board and management familiarity, market access, and other considerations. But the basic approach and principles below have broad applicability across financial institutions.

RMA Journal
Length of Resource
7 pages
Resource File
Date Published
Publication Type
Resource Type

ResourceID: 72548

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