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National Bankers Association

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Empowering Minorities in Banking: Nicole A. Elam, President and CEO of the National Bankers Association

The National Bankers Association (NBA) is the leading trade association for the country’s minority depository institutions (MDIs). The Association strives to preserve and promote Black, Hispanic, Asian, Pacific Islander, Native American, and women-owned and operated banks across the country, all working to help communities that are underserved by traditional banks and financial service providers. The NBA works collaboratively with its member banks to eliminate the racial wealth gap.

MDIs are at the center of wealth creation by providing financial services, mortgages, and small business loans to minority, low- to moderate-income, and underserved communities — when other financial institutions would not.

Today, there are 21 Black banks. At its peak, there were 134. This decline means that fewer banks are serving Black communities. The National Bankers Association is working to address the decline in the number of Black banks and the growing digital divide that is exacerbating racial inequality in financial services.

The Association’s nonprofit affiliate is leading the way by creating partnerships with technology and fintech companies to provide solutions for minority banks that help bridge the digital divide and support their continued growth and success.

Nicole A. Elam, Esq. is the youngest President and CEO of the National Bankers Association since the Association’s founding in 1927.

In this interview, Nicole A. Elam, Esq. discusses the technical assistance and resources being offered to Black and minority banks in the digital era, the importance of increasing access to Tier 1 capital, encouraging private-sector investment, and more.

Nicole A. Elam

What technical assistance or resources are being offered to Black banks to help them thrive in an era of digital disruption?

Digital innovation is needed now more than ever to scale and remain competitive in the banking industry. But implementing technology is expensive. The largest banks spend $10 to $11+ billion a year on technology. Contrast that with $374 million, the average asset size of a Black bank.

As small banks, MDIs will never be able to outspend competitors. To solve this, the nonprofit arm of the National Bankers Association, in partnership with the Alliance for Innovative Regulation, launched MDI ConnectTech to bridge the digital divide and support the continued growth and success of these critical institutions.

With $10 million in leading grant support from the Citi Foundation’s Community Finance Innovation Fund, MDI ConnectTech works with MDIs to develop and integrate technology solutions that multiply their lending capacity and effectively increase the accessibility and affordability of financial services to underserved customers.

These efforts enable minority banks to remain sustainable financial epicenters for economically vulnerable consumers and small businesses.

How are Black banks best positioned to help our communities recover and overcome many of the systemic issues that have placed them at an economic disadvantage?

Black and minority banks were born out of racism because Black, brown, and immigrant communities could not go to mainstream financial institutions for their banking services. The unfortunate reality is that’s still the case today.

Since the Freedman’s Savings Bank founding in 1865, MDIs have been the cornerstone of efforts to narrow the racial wealth gap by providing financial services, mortgages, and small business loans to minority, low-to-moderate-income, and underserved communities — when other financial institutions would not.

Today, MDIs serve communities that are 77% minority, originate a higher share of small business loans to borrowers in low- and moderate-income census tracts when compared to non-MDIs, and generate 37% of their mortgages to minority borrowers compared to only 13% from non-MDIs. Data continues to show MDIs support the community when they need it the most.

What steps are being taken to give Black banks greater access to Tier 1 capital that would allow them to scale?

Tier 1 capital is essential for banks to grow and scale. For every dollar of capital invested, they can increase their lending and impact on the community by a multiple of ten. The U.S. Department of Treasury’s Emergency Capital Investment Program provided an unprecedented $3 billion in capital investments to MDIs to augment their efforts to support small businesses and consumers in their communities that were impacted by the pandemic.

The private and philanthropic sectors have also stepped up. Over the last three years, MDIs have experienced explosive growth, growing by 35% in assets – which is faster than the national average in the banking industry. And Black banks have experienced the most growth, growing by 56% in assets.

The global pandemic and the racial awakening of 2020 brought increased attention to MDIs. The federal government, private sector, and philanthropic community have all acknowledged that supporting communities and businesses hardest hit by the pandemic, and closing the racial wealth gap, involves investing capital into the financial institutions that sit in and serve those communities.

In what ways is the capitalization of Black banks an environmental issue as well as an economic one?

A 2021 report by the U.S. Environmental Protection Agency confirmed that minority and underserved communities are often more vulnerable to the harmful impact of climate change. During financial hardships brought on by events like climate change or a global pandemic, Black and minority banks are on the ground, deeply rooted and active in the community.

The National Bankers Association, and ten other organizations led by the African American Alliance of CDFI CEOs, formed the Community Builders of Color Coalition to urge EPA to ensure that minority communities benefit equally from the Greenhouse Gas Reduction Fund.

The Fund provides $7 billion in competitive grants for clean energy and climate projects that decrease greenhouse gas emissions and enable low-income and disadvantaged communities to access or benefit from zero-emission technologies. The Coalition is seeking a grant through this Fund for community lenders, like MDIs.

By supporting renewable energy, energy efficiency, and other clean energy projects, Black banks and MDIs help to create jobs, stimulate economic growth and promote social equity while positively impacting the environment.

How can private-sector investors be encouraged to make equity investments in Black banks?

The White House-led Equitable Opportunity Coalition is a great example of the private sector stepping up. Several Wall Street banks and Coalition members have made equity investments in Black and minority banks, realizing that if you want to support communities of color then you must invest in the community lenders that support them.

Over a century of data proves the important role Black and minority banks play in closing the racial wealth gap. Add that data to the fact that every dollar of capital invested in a Black bank can be leveraged to increase lending and impact in communities of color by a multiple of ten.

Taken together that makes a compelling argument of why the private sector is making equity investments in Black and minority banks to catalyze impact and advance their racial equity efforts.

How can the minority ownership status of our Black banks be protected?

The Federal Deposit Insurance Corporation defines MDIs as a depository institution in which minority ownership is at least 51% or the majority of board members are minority, and the community served is predominately minority. Given the role Black banks and MDIs play in communities, it’s essential to protect their ownership status.

One of this year’s legislative priorities for the National Bankers Association is modifying the Bank Holding Company Act to allow for significant infusions of non-dilutive equity investments in MDIs without jeopardizing their minority status.

Under the Act, a MDI’s minority ownership status is jeopardized when an investment exceeds 25% of the institution’s equity, which is easy to do if you’re a small bank. The Association is advocating to exempt community banks under $3 billion from the 25% change-of-control provisions to attract significant equity investments and to help protect the minority ownership status of minority banks.

by Tony O. Lawson