11/20/2019 - An Examination of Regulators’ Efforts to Preserve... (EventID=110249)

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Wednesday, November 20, 2019 (10:00 AM) -- Subcommittee on Consumer Protection and Financial Institutions hearing entitled “An Examination of Regulators’ Efforts to Preserve and Promote Minority Depository Institutions.” Connect with the House Financial Services Committee Get the latest news: https://financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/FinancialDems/ Follow us on Twitter: https://twitter.com/FSCDems ____________________ This will be a one-panel hearing with the following witnesses: • Beverly Cole, Deputy Comptroller for the Northeastern District and Designated Federal Officer (DFO) for the Minority Depository Institutions Advisory Committee (MDIAC),Office of the Comptroller of the Currency (OCC) • Betty Rudolph, National Director for MDIs and CDFIs, Federal Deposit Insurance Corporation (FDIC) • Arthur W. Lindo, Deputy Director, Division of Supervision and Regulation, Board of Governors of the Federal Reserve System (Federal Reserve or Fed) • Martha Ninichuk, Director of the Office of Credit Union Resources and Expansion, National Credit Union Administration (NCUA) Overview On October 22, 2019, the Subcommittee on Consumer Protection and Financial Institutions held the first of two hearings focused on minority depository institutions (MDIs). Members engaged a panel of witnesses, including a diverse mix of MDIs, on the unique challenges faced by these institutions and the communities they serve. These firms are overwhelmingly small, concentrated in low-income communities, and often struggle to compete with larger institutions. As a result, the communities they serve are disproportionately under-served, under-banked, and lack adequate access to personal and small business loan products, reinforcing a cycle of financial exclusion and poverty. This second hearing will focus on the prudential regulators that oversee MDIs, allowing the Subcommittee to assess whether or not they are achieving statutory goals Congress established in the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) to preserve and promote MDIs. Minority-Owned Banks and Credit Unions Section 308 of FIRREA establishes several goals that prudential regulators: preserve the present number of minority depository institutions; preserve the minority character in cases of merger or acquisition; provide technical assistance to prevent insolvency of institutions not now insolvent; promote and encourage creation of new minority depository institutions; and provide for training, technical assistance, and educational programs. Section 367 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) requires the Secretary of the Treasury and the prudential regulators to each submit annual reports describing actions taken to carry out Section 308 of FIRREA. The FDIC Policy Statement Regarding Minority Depository Institutions defines MDIs as “any Federally insured depository institution where 51 percent or more of the voting stock is owned by minority individuals” or any such institution where “a majority of the Board of Directors is minority and the community that the institution serves is predominantly minority.” The terms “minority” means any “Black American, Asian American, Hispanic American, or Native American.” The composition of MDIs has changed dramatically over the past two decades, with a notable near-disappearance of African-American MDIs over this period, as illustrated in Figures 1 and 2 in the appendix. MDI banks peaked in terms of number of institutions in 2008, at 215 institutions. However, following the financial crisis and the disproportionate impact of the housing crisis and recession on minority communities, the number of MDI banks fell more than 30% over the following decade, to 148 as of the second quarter of 2019. According to the FDIC, MDI banks were 2.5 times more likely to fail than all other banks, with most of the failures happening during the crisis, or immediately thereafter. On November 1, 2019, another MDI was closed when the deposits and branches of City National Bank of New Jersey were acquired by Industrial Bank. Meanwhile, MDI credit unions have seen similar declines, with more than one-third of such institutions disappearing since 2013. Today, MDIs represent 2.8% of FDIC insured banking charters, 1.3% of assets, and 1.7% of banking offices. By comparison, MDI credit unions represent a 10% of all federally insured credit unions, although they tend to be smaller than their peers, with 87% of MDI credit unions reporting total assets of $100 million or less. What’s more, MDI credit unions “underperformed in all growth categories – including assets, membership, shares, loans, and net worth – compared to low-income credit unions, small credit unions, and federally insured credit unions overall.... Hearing Page: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=404651