NBA wins CRA rule change - National Bank Association, new rule for Community Reinvestment Act promoting joint ventures with minority banks

Black Enterprise, August, 1992 by Pearl Stewart

To help stimulate future development of inner-city communities, the Federal Financial Institutions Examination Council (FFIEC) recently endorsed a National Bankers Association (NBA) proposal promoting joint ventures between majority and minority-owned financial institutions. The new proposal offers majority-owned financial institutions Community Reinvestment Act (CRA) credit for activities with minority and womenowned banks.

NBA Chairman Robert E. James says the adoption of the proposal was a victory in the Washington, D.C.-based trade association's advocacy efforts for its member institutions nationwide. "The purpose of the proposal is to encourage majority-minority joint ventures that will strengthen the whole financial system," he says.

James, who is also president of Savannah, Ga.-based Carver State Bank, says the new policy means more majority-owned institutions will have greater incentive to participate with NBA-member banks and other women-owned institutions in capital investments, loan package agreements and other co-ventures. These types of activities will allow minority and women-owned institutions to strengthen their credit portfolios. James says minority and women-owned banks can then, "fill a service vacuum created by mainstream institutions, which refuse credit to minorities and women and abandon neighborhoods that suffer from redlining practices."

In the long run, James says that the proposal may help redevelop minority and inner-city communities. But, he cautions that the success of the policy, "depends on how aggressive majority and minority banks are in forming joint ventures."

The new proposal was included in an updated list of activities that are considered favorable in reviewing financial institutions' compliance with the Community Reinvestment Act of 1977. The CRA requires financial institutions to meet the needs of low- and moderate-income neighborhoods and mandates that their compliance performance be monitored federal regulatory agencies. Federal regulatory agencies consider CRA performance when reviewing applications for branch expansion, mergers or acquisitions. However, the act does not require denial of an application solely on the basis of poor CRA performance.

Selwyn Whitehead, president of the Oakland, CA-based Economic Empowerment Foundation and a member of the National Community Reinvestment Network, says adoption of the new proposal is "a step in the right direction." But, she is also believes majority institutions should offer more technical assistance and support to minority institutions. "They need to change the way they think about servicing minority communities," says Whitehead.