Nov 21, 2019

Minority-owned banks are disappearing

Illustration: Eniola Odetunde/Axios

Bank failures, mergers and closures have fueled a drop-off in the number of minority-owned banks.

Why it matters: The institutions seek to provide financial services to communities left behind and underserved by the mainstream banking sector.

What they're saying: "The perspectives and values of bank owners ... influence how institutions make decisions about bank leadership, strategy, new products and target markets," Beverly Cole, a member of the executive staff at the Office of the Comptroller of the Currency, which regulates some of these banks, told Congress on Wednesday.

Driving the news: Cole spoke at a hearing that, among other things, weighed legislation that would up federal government deposits and try to incentivize investment in minority banks, as American Banker reports.

The big picture: The entire banking industry has undergone a transformation since the financial crisis. Banks closed branches at the fastest clip in decades last year, per the WSJ.

  • "You're finding that larger institutions have ... moved out of some of the areas" served by minority-backed banks, Kenneth Kelly, CEO of Detroit-based First Independence Bank, which is minority-owned, tells Axios.
  • That, along with the shuttering of minority-backed banks, leaves fewer options for "financial services to low-to-moderate income and minority communities in urban, rural and suburban areas that are often economically distressed," says Rhonda Thomas-Whitley, vice president and regulatory counsel for ICBA, the industry's trade group.

By the numbers: The number of black-owned banks is at the lowest level in recent history, according to data from the Federal Deposit Insurance Corporation, a government agency that regulates banks.

  • There are 21 of those banks left — down from the recent peak of 48 before the financial crisis — following the failure of New Jersey's lone black-owned bank earlier this month.

Yes, but: Though the number of minority-backed banks is shrinking, their assets keep growing — though they're a small sliver of the entire U.S. banking industry's $17.5 trillion in assets.

  • Minority banks are formed to serve either Asian American, Hispanic American, African American or Native American communities.

When they shutter, more than three-fourths of the assets of the closed banks are distributed into other minority-backed banks, per the FDIC.

The bottom line: Minority-backed institutions have been more volatile compared with other types of banking institutions.

  • Those banks are about "half as likely as community banks to operate continuously," according to FDIC research.
  • They're also "two and a half times as likely to fail as all other banks."

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Big American banks are doing quite well in 2019

Reproduced from Retail Banker International; Table: Axios Visuals

It has been a particularly good year for American banks. Despite historically low interest rates, which theoretically eat into their profits, the sector has enjoyed significant share appreciation.

By the numbers: 75 of the world’s largest 100 banks by market cap have seen an increase in their stock price in 2019, according to a new report from GlobalData.

Go deeperArrowDec 10, 2019

Rural America's banking problem

Illustration: Aïda Amer/Axios

Add one more thing to the list of rural America's ails: diminished access to banks.

Driving the news: The shuttering of branches across the U.S. had a disproportionate negative effect in certain areas, according to new research from the Federal Reserve.

Go deeperArrowNov 27, 2019

Warren plan targets bank mergers

Illustration: Drew Angerer/Getty Staff; Aïda Amer/Axios

Elizabeth Warren last week introduced a bill to strengthen oversight of bank mergers, arguing that the current construct is a rubber stamp.

The big picture: The Federal Reserve acknowledges that it declined none of the 3,819 bank merger applications it received between 2006 and 2017. And there's no indication that it's objected since then, including the $66 billion tie-up of BB&T and SunTrust that closed earlier this morning (albeit with some required divestitures).

Go deeperArrowDec 9, 2019