Statement by John P. LaWare, Member, Board of Governors of the Federal Reserve System, before the Committee on Small Business of the U.S. House of Representatives, March 17, 1994 - Statements to Congress - Transcript

Federal Reserve Bulletin, May, 1994

It would be extremely costly for most banks to provide loan data by size of "business" because their records--especially automated records--do not group loans in this way. We recognized that any particular definition of small business that we selected might not be easily available to all reporting institutions nor would it be appropriate for all analytical purposes. Moreover, Call Report data, whether by size of loan or borrower, will not yield a comprehensive enough view to evaluate the adequacy and risk of small business financing. For example, we would need information on items such as the following: price and nonprice terms of business loans; personal or credit card loans that are used for business purposes; risk characteristics of the borrower and the firm's access to capital; and the cost and availability of credit from nonbank sources.

The Federal Reserve knows that banks play an important role in supplying credit and other financial services to small businesses, and we have a strong commitment to better understanding how the financing needs of these businesses are being met. For this reason, we are now undertaking an extensive survey of 6,000 small businesses, including 1,200 minority-owned small businesses. The survey will gather information on characteristics of the business firms and their owners, on their income flows and balance sheets, on their use of financial services and credit sources, and on their recent borrowing experiences. The information we hope to gain from this survey would be impossible to collect on the Call Report.

SUMMARY REMARKS

Finally, let me summarize my remarks this morning by saying that the Federal Reserve recognizes the highly important role that small business firms play in the economy and the need to promote the flow of credit to these firms. We intend to continue to seek ways, consistent with safety and soundness standards, to achieve this objective.

(1.) The attachment to this statement is available from Publications Services, Board of Governors of the Federal Reserve System, Washington, DC 20551.