More Bank For Your Buck? - how the Gramm-Leach-Bliley Act will affects personal finance management - Industry Overview

Black Enterprise, May, 2000 by Jeffrey Mckinney

Walter E. Grady, president and CEO of Seaway National Bank of Chicago (No. 5 on the BE BANKS list), agrees. With traditional sources of income trailing off, "instead of just relying on offering checking, savings and mortgage services, black-owned banks could potentially sell car insurance, annuities, stocks and municipal bonds," says Grady. "This creates [more of] a level playing field for us, albeit on a smaller scale." Seaway, with assets of $274 million, plans to offer brokerage services, annuities, car insurance and other nonbanking services.

Grady adds that the law offers African American-owned financial institutions the opportunity to pick up customers from larger mainstream institutions, such as Merrill Lynch and Citicorp, as they expand their operations. Smaller banks can offer services at lower fees because their overall expenses aren't as great as the larger players'.

Donald Davis, chairman and CEO at First Independence National Bank (No. 13 on the BE BANKS list) of Detroit, says that by forming alliances or partnerships, black-owned institutions also could offer minority businesses more products and services, including brokerage accounts, asset management and municipal bond underwriting. "In turn," Davis says, "those services would benefit black-owned businesses because they would provide them with new sources of financing and the ability to raise capital."

Whatever the fallout, experts say the new law will have a profound impact on the country as financial institutions walk a fine line between serving Main Street and Wall Street. Stern still believes that because financial service companies need to increase market share and revenues, they will take notice of the $600 billion income of the African American market.

"I hope [companies] aren't so busy trying to be a one-stop shopping venue that they continue to miss the overall message," Stern says. "The customer and his or her own needs should be the starting, middle and end point of all their efforts."

So, where does this leave you? To safeguard your financial future, shop around carefully for the best deal whether this be at a conglomerate or single-service firm. Use industry regulators and the Internet as resources before you latch on to any one financial-service company. A number of firms on the Web are already collecting account information from financial institutions so that customers have one consolidated statement. Your ability to make an informed decision will be key in shaping the outcome of this new law.

RELATED ARTICLE: Meeting CRA Requirements

SHORTCHANGING THE BLACK COMMUNITY

One of the biggest criticisms of the Gramm-Leach-Bliley Act is its increased leniency toward the Community Reinvestment Act (CRA), which forces banks to provide services in communities where they operate. Here's where critics say the new law falls short:

* Regulators are becoming less rigorous about monitoring the community reinvestment activities of banks. Prior to the law, every two years regulators examined small banks or thrifts with $250 million or less in assets for CRA compliance. Under the new law, those entities will only be examined every four to five years. "Cutting regulatory oversight gives these institutions less of an incentive to make loans and other commitments to minorities and low-income consumers," says John Taylor, president and chief executive at the National Community Reinvestment Coalition. He says this could impede access to credit among minorities.