Minority owned depository institutions (“MDI” or minority banks) play a unique role serving as catalysts for economic growth and revitalization in the neighborhoods they serve. These banks often play a critical role in providing credit, capital and financial services to low-to-moderate income and minority communities in urban, rural and suburban areas that are economically distressed and have historically been underserved by the financial industry.
Minority banks know and understand the culture of the communities they serve and are able to provide customized and culturally sensitive products and services. They finance small businesses, make housing affordable, revitalize community facilities, and provide financial literacy and technical assistance to their customers.
Minority banks are committed to the social mission of helping to improve lives and stabilize neighborhoods despite the difficulties and challenges of operating in distressed communities. It is crucial that minority banks have the legislative, regulatory, and financial support they need to stay operational and profitable. Collaborative relationships or partnerships with minority banks is beneficial to all parties. Banks may receive Community Reinvestment Act credit considerations for direct investments, loan participations, sharing of bank staff and resources, and information sharing with minority banks.
ICBA supports the opportunity for minority banks to receive the first right to bid on the assets and deposits of a failed minority bank in order to preserve its minority bank character, consistent with section 308 FIRREA.
In December 2019, the House Financial Services Committee passed the Ensuring Diversity in Community Banking Act of 2019 (H.R. 5322), introduced by Rep. Gregory Meeks (D-NY), and the Expanding Opportunity for Minority Depository Institutions Act (H.R. 5315), introduced by Rep. Joyce Beatty (D-OH).
H.R. 5322 would create a new “Impact Bank” designation for banks with a specified percentage of loans extended to low-income borrowers or communities; would create measures to promote de novo MDIs; and would facilitate investment and the placement of federal deposits in MDIs.
H.R. 5315 would create a mentor-protege program at Treasury for larger banks to mentor MDIs and community banks under $2 billion. This program will help MDIs and community banks gain operational expertise and experience, ultimately helping them better serve their communities and customers over the long term and across business cycles.
Compliance with the Community Reinvestment Act. ICBA believes that CRA regulations should exempt MDIs from documentation and full-scope examinations, thereby supporting these institutions through compliance relief. The mission of MDIs is fully consistent with the CRA, and excessive compliance burden should not keep MDIs from pursing this mission.
Staff Contacts: Kianga Lee, Rhonda Thomas-Whitley and Amy Roberti