Banks Need to Value the Communities They Serve: Chicago Fed Event
The importance of banking institutions valuing the communities they serve was reasserted in a recent gathering of researchers and industry leaders at a Chicago Fed Economic Mobility Project event. Business models and market forces prove to be insufficient explanations for why we see fewer formal banking services offered and/or leveraged in Black and low-income communities, according to research presented at the event. One speaker, University of California Professor of Law Mehrsa Baradaran, posed the rhetorical question whether one of the reasons we see reduced banking investment in Black communities is that “we don’t think that there is something to be invested in.”
“We invest in certain types of genius,” she said, “while ignoring other kinds.”
Baradaran and the other panelists shared valuable historical context that can inform future policy on community banking topics ranging from digital transformation needs to regulatory concerns and deposit volatility.
Chicago Fed researchers Jung Sakong and Maude Toussaint-Comeau shared their latest work on banking access. Toussaint-Comeau, a senior economist and economic advisor, discussed how the number of Black-owned minority depository institutions (MDIs) has shrunk and how the entire MDI sector will need additional support to hedge against economic shocks so that they can continue to serve their communities.
The research by Sakong, an economist, explores the use of banking services in both low-income and Black communities and finds reduced use in both groups as compared to the average, but for the opposite reasons. Low-income communities have access to bank branches but demand far less formal banking services; Black communities, on the other hand, have similar demand to White communities but have less access to bank branches.
The Sept. 26 event, titled Minority-Owned Banks and Banking Access in Minority Communities, was part of the Chicago Fed’s Economic Mobility Project, which aims to better connect research and policy communities on issues related to economic mobility within the United States.
Before Toussaint-Comeau and Sakong presented their papers, Tracey Morant Adams, senior executive vice president and the chief community development and corporate social responsibility officer for Renasant Bank, gave opening remarks. The presentations were followed by a roundtable discussion moderated by Bloomberg’s Jonnelle Marte. Joining Baradaran on the panel were Anthony Barr, research and impact director at the National Bankers Association, and Gregg Brown, president and chief executive officer at South Side Community Federal Credit Union. The event concluded with brief remarks from Nicole Elam, president and CEO of the National Bankers Association.
To explore further:
Jung Sakong’s policy brief can be found here and the accompanying working paper can be found here.
Maude Toussaint-Comeau’s policy brief can be found here and the accompanying article can be found here.
A transcript and replay of the event can be found here.
