Tell Bank Regulators to enforce Community Benefits Agreements that Require Big Banks to Provide Fair Access to In-Person Banking Services
Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Federal Reserve Board of Governors, & Consumer Financial Protection Bureau
Bank regulators need to do more to ensure that big banks provide equitable in-person access to financial services by making sure low income and BIPOC communities are not overlooked when deciding where to open new brick and mortar branches. By enforcing the terms within Community Benefits Agreements that include requirements for fair and equitable distribution of bank branches, bank regulators can improve fair access for all communities.
According to a new, first-of-its-kind report from the Committee for Better Banks (CBB), in partnership with the California Reinvestment Coalition, examining branch openings at America’s largest banks shows just how deep racial bias runs in the U.S. financial services sector. The report, “Mapping the Banking Divide: How Branch Openings Close Financial Opportunities,” found that only 15% of new bank branches opened in communities that are both low-to-moderate income (LMI) and majority Black, Indigenous and People of Color (BIPOC).
“Consumers rely on a physical bank branch to conduct important business like withdrawing cash, making deposits, or applying for loans. They trust bank workers to guide them through the process and help them make the best decisions,” said Eric Payne, executive director of the Central Valley Urban Institute, a non-profit that speaks out and protects the most vulnerable residents of California’s San Joaquin Valley. “Banks have a choice. They can continue to limit access to financial services for BIPOC, LMI and rural communities, or they can change course and help consumers thrive.”
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We support fair access to in-person financial services for all communities by enforcing Community Benefits Agreements that have been negotiated with community leaders to ensure the public interest in equitable access to financial services is protected. Community Benefits Agreements are a great tool to ensure there is a strong public benefit when banks grow, expand, or merge.
A recent investigation by the Committee for Better Banks in partnership with the California Reinvestment Coalition found only 15% of new branches opened by the 14 largest retail banks over the past 11 years were located in Low-Income, Black, Indigenous, and People of Color (BIPOC) Communities. In contrast, 61% of all new bank branches opened in predominantly white, middle-to-upper income neighborhoods. Bank branches remain a vital service to help consumers achieve financial success. Unfortunately, not only are banks overlooking many communities when they open branches but they are also woefully understaffing branches, causing tremendous mental and physical stress to bank workers and making it more difficult for customers to access critical services.
We recommend CBA’s include a service area test that analyzes branch openings and not just branch closings. The location of branch openings is increasingly relevant in determining who gets a neighborhood brick and mortar bank. In 2020, branch openings outpaced branch closings for the first time in nine years, demonstrating branches ongoing viability. Further, analyzing the pattern, trends and location of branch openings is a window into the future operations of a bank since over time the aggregation of where new branches are located will comprise a growing share of a bank’s overall branch footprint and service area; whereas simply reviewing branch closings is akin to looking into the rearview mirror of a bank’s operations.
Since the 2008 financial crisis, BIPOC communities have lost more branches than predominantly white neighborhoods regardless of income. Surprisingly, wealthy Black neighborhoods lost more branches than LMI Black communities. This trend is even more stark when analyzing branch openings.
Hold big banks accountable by enforcing Community Benefits Agreements that prevent underserved communities from being overlooked any longer.