Tag Archives: the squeeze on community banks

A cri de couer for regulatory reform — Kathryn Underwood

Writing in American Banker, Ledyard National Bank CEO Kathryn Underwood, makes the case for legislative and regulatory relief for community banks.

Excerpt:

Tailoring rules to the size and risk profile of regulated institutions will not only ease the burden on local institutions and reduce the pressures that are stifling our ability to serve our customers, it will also help preserve our diverse and decentralized banking system.

Full article, “Community banks like mine sorely need regulatory relief ,” here.

An inter-related plight:
Minority banking and community banks

“I’m very self-conscious about it,” said B. Doyle Mitchell Jr., African-American president of the $390 million-asset Industrial Bank. “When you have 1,500 people in the room and three blacks, you know you’re one of only three.”

Describing his presence at a recent banking conference, Mitchell spoke to a larger issue: The continued plight of minority-owned and -operated banks, and — arguably, related — the squeeze on community banks that began nearly a decade ago.

decline in black banks, 2001-2014. source: FDIC. photo credit: Washington PostThis is paradoxical on many levels.

For one, the United States, as most recognize, is rapidly becoming a “minority nation.” It’s estimated that whites will be less than 50 percent of the population in a little more than a decade — sometime early in the 2030s.

By contract, non-minority-owned banks hold 99 percent of all US banking assets. And the Federal Deposit Insurance Corporation recognizes just 157 minority-owned community banks in the U.S. — out of 5,870 total. That’s about 3 percent.

The number of black-owned banks has declined to 20 (not a typo) in 2017, from 48 in 2001. (See table nearby. Source: FDIC.)

Regulation vs. Growth strategies

Another paradox is this: the lack of diversity in banking and financial services continues despite long-standing effort to regulate greater minority participation — in both ownership and management — into existence.

As Ellen Ryan notes in an article for Independent Banker, “The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 says regulated financial institutions are ‘strongly encouraged’ to disclose their diversity policies and practices online and submit self-assessments to their primary regulator. Each agency has developed standards for assessing these policies and practices.”

Would a strategy of attending to the growth and health of the community bank sector have softened this trend — or reverse it in the future?

It’s difficult to say; the United States hasn’t tried it.