ReportWire

Tag: Diversity and equality

  • Small banks ‘feel like hostages’ to their core systems: OCC’s Hsu

    Small banks ‘feel like hostages’ to their core systems: OCC’s Hsu

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    The power wielded by a small number of companies in the core processing market is one of the — if not the most — pressing issues that affects minority depository institutions wishing to innovate.

    “In every single discussion I’ve had about banks, digital, and modernization, especially with community banks, all roads lead through the core,” said Michael Hsu, Acting Comptroller of the Currency, said in a recent fireside chat hosted by the Alliance for Innovative Regulation. “I’ve heard a lot of frustration from community banks because they feel like hostages in these relationships and have no negotiating leverage.”

    That was one theme to emerge in a daylong set of panels and conversations on Thursday organized by AIR around its multi-year MDI ConnectTech initiative, which explores problems and solutions related to minority depository institutions and digitization in partnership with the National Bankers Association, Inclusiv and other groups. Speakers, who included Hsu and former National Credit Union Administration chairman Rodney Hood, laid out the other obstacles for MDIs in buying and implementing technology, from the cost to finding the necessary expertise, as well as solutions.

    At stake is the ability for financial institutions focused squarely on under-resourced communities to be competitive and serve their audiences effectively. 

    In her ongoing research as the program director for MDI ConnectTech, Alexandria Currie, of the National Bankers Association, found that cost is the number one barrier to minority depository institutions across the board in adopting technology. The institutions she examined ranged in size from $30 million of assets to more than a billion.

    Staffing is next on the list.

    “If I have the money, do I have the staff capacity to implement and learn the technology with my three to four-person loan department?” she said during a panel on MDIs and digital transformation.  She pointed out that a March report from the Government Accountability Office on small lenders and technology concluded something similar: initial and ongoing technology costs were the top two reasons that community development financial institutions and MDIs could not obtain the technology they needed, while limited staff capacity came third. 

    The topic of negotiating contracts with core services providers came up frequently as something complex and cost-prohibitive. 

    The three major core providers, FIS, Fiserv and Jack Henry, have grown through mergers and acquisitions, meaning different banks will have different experiences depending on which service they are using under the larger umbrella, said Rob Nichols, CEO of the American Bankers Association.

    Currie has seen situations where, for example, a bank will sign a long-term contract with a core company only to find the provider is sunsetting that specific product midway through the contract and ceasing compliance updates. Yet the bank will have to pay to convert to a new system under the same provider.

    “There are sticking points in contracts, and there is space in the regulatory environment to tighten that up and not allow some of these things to happen,” she said.

    Brian Argrett, CEO of CityFirst Bank, a $1.4 billion-asset institution in Washington, DC, echoed the thought. 

    “My question is, how can the regulatory community provide both pressure and perhaps policy that benefits small institutions?” said Argrett. “The imbalance in power makes it very difficult to change cores from a financial and contractual standpoint.”

    The cost issues facing MDIs can partially be offset through “being creative with other forms of finance that are loosely structured to let you use it for operational transformation,” Argrett said, pointing to the Emergency Capital Investment Program and the Environmental Protection Agency’s Greenhouse Gas Reduction Fund, as two examples.

    The broader issue of digitizing an institution with few resources can be tackled by taking small steps.

    “Community bankers will say, we know we have to modernize but we don’t know where to start,” said Hsu.

    He recalls one fintech investor recommending that banks start by digitizing their forms because it’s a manageable project, pulls in different teams, and encourages the snowball effect once the institution sees an immediate impact.

    He also suggests small banks boil down their strategy to a simple question: who is your future customer? 

    “MDIs and CDFIs are excellent with their existing customer base. They know them better than anyone,” said Hsu. “But who is the future customer? Probably someone younger and more addicted to their phones.”

    Currie has advice for small banks to counterbalance some of the power the three major core providers wield: stop signing all-in-one bundled deals, which typically combine core data processing, card processing and online and mobile banking. Out of the 15 MDIs she assessed as part of her research, all had bundled their core contracts.

    “That means even if I want to switch one of those things I’m now bound to all three for the term of this five, seven, or 10 year contract,” she said. 

    Even though discounted pricing for all-in-one packages can be enticing, she finds it pays to shop around for digital banking and card processing services.

    “I hear that everyone wants to go to a different core,” she said. “That is not the solution. It’s how we navigate within the confines we have now.”

    Current and former regulators also acknowledged the role they could play in guiding MDIs toward digitization.

    Jo Ann Barefoot, founder and CEO of AIR, noted on one panel that one element she didn’t appreciate as a former bank regulator is “the degree to which the examiners raise an eyebrow at some new piece of technology and the bank determines, I better not do that,” she said. “We’re going to have to reverse that. I’m dreaming of the day when a field examiner will come into a financial institution, see an antiquated piece of technology, raise their eyebrows and say ‘I can’t believe you’re still on that.’”

    The role of the regulator is especially potent when it comes to leveling out the balance of near-monopolistic power between the three major core providers and small banks.

    “I wish I’d been more proactive in taking this on as an issue,” said Hood of his time at the NCUA. “It’s lamentable that in the wake of George Floyd, you had Wall Street investing in these institutions that serve communities of color but you didn’t hear anything about the core providers.”

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    Miriam Cross

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  • The roots of customer trust are more varied than you think

    The roots of customer trust are more varied than you think

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    The roots of consumer trust in financial services firms can vary depending on the community, writes Domarina Oshana.

    Pixelbliss – stock.adobe.com

    Here’s a brain bender: We can share the same values, but not completely trust each other.

    Humans hold complicated and sometimes contradicting emotions, so skepticism can exist even when there is alignment in deeply held beliefs. There’s a complexity about trust that is reminiscent of the duality that exists between joy and grief. As Proverbs 14:13 puts it, “Even in laughter the heart may ache.”

    At The American College Cary M. Maguire Center for Ethics in Financial Services, we wanted to better understand the dynamics of trust in the financial industry so we could uncover these contradictory dynamics. Our inaugural Trust in Financial Services Study underscored the dualities of trust. As one consumer put it, “You can hold the same values as me and still screw something up. Just because you love animals like I do, doesn’t mean that you’re not going to steal my money.”

    That consumer’s remark underscores a key takeaway from our research — consumers hold complex beliefs about financial companies. We found that for seven in 10 consumers (67%) alignment around values is key to understanding the mechanics of consumer trust. Today’s financial services professionals need to know the consumer values that influence company use. Why? Because understanding consumers’ values can help financial companies build trust with consumers.

    Yet, awareness of, or even alignment with, consumer values is not enough to win consumer trust. What’s needed is an understanding of consumers’ unique reasons for trust, as this can help financial companies to close gaps in trust, and, thereby, build their trustworthiness. First, let’s unpack the values.

    There is a spectrum of values that influence company use. These “influential values” include “hot-button issues” such as company contributions to social justice and diversity, treatment of employees, community involvement, customer service and honesty/transparency. There are also more mundane values such as price/perceived value of a product or service and the convenience of accessing money.

    While consumers desire values alignment, they are also cognizant of tradeoffs they must make due to practical considerations such as price, convenience and lack of choice. For instance, sometimes short-term budgetary constraints or maintaining longer-term financial goals take precedence over core values such as social justice and environmentalism. Much like the scenario that plays out with utility companies, it can be difficult for some consumers to completely avoid companies that don’t align with their core values, as they may not be able to find a particular product or service otherwise. Yet, one deal breaker for consumers seems to be instances where they see a company treating people unfairly.

    Consumers want companies to not discriminate and to treat all customers fairly. Some consumers will actively avoid using companies that they feel do not treat everyone fairly, though they acknowledge it can be difficult to completely bypass them.

    As the financial industry considers how to manage the changing U.S. demographic landscape, understanding the nuanced trends in consumer viewpoints can inform efforts to close gaps in trust. Financial companies can position themselves as trustworthy to consumers by acting on what is important to them when it comes to placing their trust in a financial company.

    For instance, from our research, we learned that financial companies could stand out as trustworthy to communities of color by acting on their differentiating reasons for trust. These are (in order of importance): provide a website/app with detailed information on products and services; train employees to understand different ethnicities and backgrounds, and to check on them throughout the year; have advertising that shows the company cares about people like them; demonstrate that employees share their personal values; offer services that are nearby, and that are used by those known in the community; and guide decision-making with pros and cons. African American consumers are significantly more likely to trust for this last reason than other consumers.

    To benefit from financial products and services, consumers need to feel good about the institutions and professionals entrusted with their money. Leaders can develop an awareness of trust’s relational and situational nature. It’s a building block to gaining perspective on what motivates consumers’ behaviors and their feelings about the trustworthiness of the financial institutions with which they have relationships.

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    Domarina Oshana

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  • ‘Economically invisible’: A banker’s push for better data on Native Americans

    ‘Economically invisible’: A banker’s push for better data on Native Americans

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    “If banks and financial institutions and asset managers don’t see the opportunity here, if they don’t understand how tribes are structured and the industries that they operate in, we’re going to be economically invisible,” says Dawson Her Many Horses (right), who grew up on the Rosebud reservation in South Dakota and is now a Wells Fargo managing director.

    Native American Finance Officers Association

    Dawson Her Many Horses, Wells Fargo’s head of Native American banking, is on a mission to improve the availability of economic data across Indian Country.

    The gaps in data are staggering, hampering the ability of tribes and the U.S. government to track economic outcomes and making it tougher for investors to drive capital into tribal communities.

    Native leaders, the federal government and private sector leaders are all discussing ways to improve data collection and sharing, while recognizing tribes’ sovereignty and ownership over their communities’ data. Her Many Horses, a commercial banker who works with tribes, is playing a central role in thinking through those solutions.

    “If banks and financial institutions and asset managers don’t see the opportunity here, if they don’t understand how tribes are structured and the industries that they operate in, we’re going to be economically invisible,” Her Many Horses said in an interview. “We’re not going to get the capital that we need in our communities.”

    Her Many Horses, who grew up on the Rosebud reservation in South Dakota, has spent roughly two decades working with tribal governments and businesses. He’s helped them issue bonds, get loans to expand their casino operations, diversify their revenue streams and manage their day-to-day cash.

    His role in conversations about tribal data accelerated in 2018, when he joined Wells Fargo and asked for more resources to build the company’s Native American banking business. Executives asked him to put together data outlining the business case.

    “I thought it was a fair question, but I was also a little daunted by it,” Her Many Horses said, pointing to the scant publicly available data and market analyses.

    Her Many Horses and his team tracked down the available data and were ultimately able to paint a picture of Native communities. But the bigger lesson was about how difficult it was to do so — and the fact that it would be even tougher for investors with far less familiarity with tribal communities.

    “How would they even go about it? They probably wouldn’t, right? So that’s where data comes in,” Her Many Horses said.

    A report last year by Wells Fargo and the Boston Consulting Group highlighted the size of the “data desert.” It noted that the country lacks measurements of Native American gross domestic product, wealth and other critical metrics. 

    The report, released in the wake of a pandemic that hit Native communities particularly hard, focused on opportunities to make economies in Indian Country more resilient to downturns. But it also focused on the challenges those communities face, including a “fragmented” capital landscape, subpar broadband access, fewer bank branches and gaps in data.

    While tribal governments can easily track data on their business operations, they aren’t required to share that information, which the report said makes it hard for investors to identify opportunities. In 2020, the lack of publicly available data hampered federal officials’ ability to target aid, according to the report.

    The desire to keep financial information private is understandable, the report said, but a trusted entity could publish aggregate data while respecting tribes’ confidentiality. One example is the annual revenue report from the National Indian Gaming Commission, which regulates tribally owned casinos.

    ‘Open and honest dialogue’

    In the months since the report’s release, “open and honest dialogue” has taken place among tribal leaders, policymakers, researchers and private sector leaders, Her Many Horses said.

    At a November 2022 discussion, participants raised past instances of the federal government and researchers misusing tribal data, according to a summary of the discussion. The Havasupai Indians, for example, won a settlement in 2010 after Arizona State University researchers used DNA samples from tribe members for research that went beyond their original purpose: explaining the prevalence of diabetes within their community.

    But the discussion also found widespread agreement that, when it’s done right, data-sharing can benefit tribal communities. It can help tribes qualify for more federal programs, track economic outcomes and outline the economic impact their communities have on each region of the country.

    “What had begun as a tentative conversation about leveraging tribal data to attract private investment quickly evolved into a deeper, richer and more heartfelt discussion about the ways tribal data can be weaponized by non-Indian stakeholders — or leveraged by tribal citizens to strengthen tribal operations and showcase tribal economic power,” reads a summary of the meeting, which was convened by Wells Fargo and the Aspen Institute Financial Security Program.

    Similar work is taking place at the Federal Reserve Bank of Minneapolis’ Center for Indian Country Development, which analyzes tribal economic data and researches the topic. Native people have analyzed data on the natural world, health and trade “since time immemorial,” Casey Lozar, the center’s director, wrote this year.

    Some tribal data now lives on complex spreadsheets; other data is in stories passed on over generations. But data collection has expanded both within tribes and outside of them — shedding more light on Native businesses, investment opportunities, the availability of credit, housing and other key issues.

    “High-quality intertribal data would complement the lived experience of Indian Country and allow us to pen our own accurate economic narrative,” wrote Lozar, an enrolled member of the Confederated Salish and Kootenai Tribes.

    A ‘fairly unique’ position

    Her Many Horses will continue playing a role in those conversations both at Wells Fargo and at the Aspen Institute, a global think tank where he was recently named a finance leader fellow. Wells recently promoted him to a managing director, which the $1.9 trillion-asset bank said made him one of the first enrolled tribal members in that role at a major U.S. bank.

    Robert Maxim, a senior research associate at the Brookings Institution and a citizen of the Mashpee Wampanoag Tribe, credited Wells Fargo for elevating Her Many Horses to a position that he said appears to be “fairly unique” among big banks.

    “It is still relatively rare for banks to be thinking about Native communities and Indigenous communities,” Maxim said, adding that having Native people in key roles can help lenders understand the nuances of working in those communities.

    “The fact that he’s in the position he’s in, I think, really matters,” added Maxim, whose research has focused on the need for changes to the U.S. census and on labor trend data that shows that Native Americans’ recovery from COVID-19 is far from complete.

    Her Many Horses didn’t intend to work in banking early on. As a child, he said he was often told to “get a law degree so that you can become a better advocate for tribal communities.”

    At Columbia University, he majored in political science. Then, in order to bolster his law school application, he got an internship in Merrill Lynch’s office of the general counsel.

    The internship translated into a permanent job at Merrill Lynch, where he led efforts to develop a companywide Native American market strategy. He’d soon focus specifically on investment banking, helping underwrite Native American casino-related bond issuances.

    “There weren’t any other Native Americans in investment banking” at the time, just before the 2008 financial crisis hit, Her Many Horses said.

    He recalled one pitch meeting where higher-ups at Merrill presented to an East Coast tribe. Her Many Horses had put together the meeting presentation, but he didn’t expect to have to speak up.

    “The treasurer of the tribe who we’re presenting to just looked at me and said, ‘Hey Dawson, what do you think about this deal?’” he recounted.

    Her Many Horses got an M.B.A. from Dartmouth and soon returned to Merrill Lynch — which had by then been folded into Bank of America in a crisis-era deal. He was a senior relationship manager on the casino team, where he continued his prior work and gained more perspective on tribal economic development.

    Wells Fargo hired him in 2018 and promoted him to head of Native American banking in 2021. According to his LinkedIn page, the unit’s revenues have risen considerably in recent years despite two controversies that hurt Wells’ reputation in the Native American market: the bank’s sales practices scandal and its financing of a controversial oil pipeline.

    The bank was facing significant pushback from shareholders, activists and civic leaders over the Dakota Access Pipeline project, while it was also grappling with the fallout of revelations that its employees had opened millions of unauthorized accounts for consumers.

    Dawson said he joined the bank because it’s “important that tribes have banking options.” Most large banks only work with tribal casinos, but Wells Fargo also works with clients such as tribal governments, Alaska Native regional corporations and Alaska Native villages.

    “You can’t say you’re committed to a community if you only do business with a small segment of it,” Her Many Horses said. “I wanted to build a business that our clients and Wells Fargo employees could be proud of.”

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    Polo Rocha

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  • Judge overturns corporate board diversity law in California

    Judge overturns corporate board diversity law in California

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    A state law enacted in May 2020 required California-based corporations to appoint between one and three minority board members, depending on the size of its board of directors.

    David Paul Morris/Bloomberg

    In the latest legal blow to efforts to mandate diversity in corporate boardrooms, a federal judge has struck down a California law that required banks and other companies to appoint a minimum number of board members from underrepresented communities.

    The three-year-old law, which applied to corporations headquartered in California, imposed an unconstitutional racial quota, a judge in the Eastern District of California ruled this week.

    The law forced “a certain fixed number of board positions to be reserved for certain minority groups” in violation of the Equal Protection Clause of the U.S. Constitution, wrote Senior U.S. District Judge John Mendez.

    The decision rolls back a law intended to address corporate discrimination against underrepresented communities including Black, Hispanic, Asian, Pacific Islander and indigenous groups, as well as individuals who identify as LGBTQ+.

    Enacted in May 2020, the law required California-based corporations to appoint between one and three minority board members, depending on the size of the company’s board of directors. Fines for noncompliance ranged from $100,000 to $300,000.

    The law was challenged in court by the Alliance for Fair Board Recruitment, a nonprofit group that’s dedicated to corporate board recruitment practices “without regard to race, ethnicity, sex and sexual identity,” according to its website.

    Attempts to “semantically cast” the law as “flexible” did not overcome the court’s finding that the law established a racial quota, Mendez wrote in the ruling.

    The California Secretary of State’s office and lawyers representing the Alliance for Fair Board Recruitment did not respond Friday to requests for comment.

    The 2020 law has been the subject of multiple court challenges. Last year, a state court judge ruled that the law violated the Equal Protection Clause of California’s Constitution. Mendez initially granted a stay in the federal suit pending an appeal of the state court decision, but later lifted the stay.

    California courts have also blocked a 2018 state law that would have required companies based in the state to add more women to their boards.

    State laws on board diversity have also been enacted in Illinois, Maryland and New York. And a federal appeals court is currently reviewing the Securities and Exchange Commission’s approval of corporate board diversity rules devised by the Nasdaq stock exchange.

    Lance Christensen, vice president for education policy and government affairs at the California Policy Center, a free-markets group, said courts are recognizing that California’s legislature is “overstepping its boundaries on issues that are specific to corporate governance.”

    “Any time the state steps in to control, constrain or redirect a business’s purpose, mindset and mission, [it] can have a negative impact on the economy in California,” Christensen said in an interview.

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    Jordan Stutts

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  • Community bank, loan marketplace pilot transaction-based underwriting

    Community bank, loan marketplace pilot transaction-based underwriting

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    Texas National Bank has been strategizing how to tackle social issues in the Rio Grande Valley. 

    One example is its no-fee small-dollar loan, built with bank and credit union technology provider Velocity Solutions and meant to counter the abundance of payday lenders operating in the bank’s communities. The interest rate will hover just under 18% and the product is expected to launch within days.

    Another initiative is a pilot project with Lendio to deploy transaction-based underwriting for small-business loans. Although Lendio is better known for its business loan marketplace, where it sources borrowers and solicits offers from its network of bank and nonbank lenders, it is testing alternative underwriting capabilities with Texas National, which is based in Mercedes.

    “We realized through years of experience that fintech lenders have gotten really sophisticated at quickly analyzing borrower applications, generating decisions and often using transaction data as a way of evaluating the borrower rather than relying so heavily on income statements and credit scores,” said Philip Taliaferro, general manager and senior vice president of software as a service at Lendio.

    The goals are reflective of other small banks and minority depository institutions: to learn how to lower costs, increase efficiency and improve the customer experience using technology, in this case with small-business loans. Taliaferro and Rey Garcia, executive vice president of Texas National, will discuss their pilot on June 12 at American Banker’s Digital Banking Conference.

    “When we see the fintech world taking over the banking world, it keeps me up at night,” said Joe Quiroga, president of the $679 million-asset Texas National. “This was our small attempt to say, we’ve got to innovate and keep up with it; we might not develop the next best product but we will learn a lot,” such as which algorithms or automated processes can take over more efficiently from human analysis.

    “We don’t have huge expectations for growth, but we have huge expectations for learning,” he continued.

    Such experiments with alternative data may also trigger the question of how viable alternative transaction-based underwriting is compared to traditional credit scores.

    Texas National’s largely immigrant customer base frequently operate in cash, and do not borrow often, which means creditworthiness may not be reflected in their credit scores.

    “What got us excited about this product is how we can be socially mindful and create this responsible solution to allow small-business owners that primarily operate in cash to get credit,” said Garcia. “This tool that analyzes alternative data lets us improve the speed and accuracy with which we make decisions.”

    Lendio’s technology will mine customer deposit data from the bank’s core system, run it through algorithms and classify the transactions. It will tabulate the results in its model, detect factors such as revenue over the last 30 days, or number of days where funds dropped below a certain threshold, and pre-qualify customers for a loan.

    Taliaferro cites two reports: one from the Bank for International Settlements in 2022 that studied two lenders that used alternative data and found they predicted future loan performance more accurately than the traditional approach to credit scoring, particularly in areas with high unemployment; another co-written by New York University associate professor of finance Sabrina Howell, which found that process automation boosts lending to Black-owned businesses.

    “If I rely exclusively on traditional credit scoring and traditional underwriting models I am more likely to exclude the type of borrower I should be more focused on supporting,” said Taliaferro.

    Texas National is starting slow. Currently it is restricting the pilot to existing customers, because the bank has a rich history of their transactions and wants to test the solution with well-known customers of the bank before opening it to a larger market.

    “We put on tighter risk limits so we can monitor performance, measure progress, and evaluate potential issues that come up, then iterate from that,” said Garcia. “We’re trying to be mindful about how much we are lending until we’re more comfortable.”

    Although Texas National is its first pilot customer, Lendio is also piloting transaction-based underwriting with a large regional bank and another community development financial institution.

    Transaction data has not reached the mainstream with underwriting among traditional banks.

    “I’m willing to argue that statistically speaking, it won’t result in better loan repayment because historical transaction data is very difficult to utilize to extrapolate future transaction data,” said Mitch Wein, head of community banking and credit unions at Aite-Novarica. There are some businesses where transaction data may be more predictive than other types, he believes, for instance a business with fixed and steady contracts underpinning its revenue.

    However, nontraditional data can augment credit score underwriting to potentially give users better outcomes in certain segments of lending, said Wein. “If you can collect that data in a usable repository, in a consistent way, and tune the algorithms effectively, you can get that outcome, which is a win for the banks.”

    Texas National is currently using credit scores in addition to transaction-based data. The bank says it will continue to assess the underwriting evaluation process as the product evolves.

    “Over time we will see the importance of alternative data continue to increase,” said Wein, “as there is more data being generated and because of capabilities like artificial intelligence and more advanced machine learning, [which means we] will be able to more deeply evaluate the quality of that data for algorithmic purposes.”

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    Miriam Cross

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  • Brown calls for scrutiny of branch closures that spark local concern

    Brown calls for scrutiny of branch closures that spark local concern

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    “Banks serve a unique role in the functioning of our financial system and economy,” Sen. Sherrod Brown, D-Ohio, wrote in a letter to regulators about branch closures. “That is why they must serve the needs of all members of their community, and all communities across the country.”

    Joshua A. Bickel/Bloomberg

    After community activists expressed opposition to a bank branch closure in a low-income section of Toledo, Ohio, Senate Banking Committee Chairman Sherrod Brown urged regulators to scrutinize branch closures that spark local concern.

    Brown, an Ohio Democrat, wants the Office of the Comptroller of the Currency to hold public meetings on branch closures in situations where community members request them. He also says the OCC should require banks to meet all legal requirements before they’re allowed to close branches.

    “Banks serve a unique role in the functioning of our financial system and economy,” Brown wrote in a March 2 letter to acting Comptroller Michael Hsu. “That is why they must serve the needs of all members of their community, and all communities across the country.”

    Brown’s letter referenced the situation in Toledo, where the nonprofit Fair Housing Center recently asked the OCC to hold a public meeting on Fifth Third Bancorp’s plan to close a branch in the Englewood neighborhood. Brown wrote that he supports the OCC holding a public meeting.

    The Fair Housing Center wrote in a Feb. 16 letter to the OCC that the branch closure will deprive the surrounding neighborhoods of banking services and credit opportunities that local residents need.

    “The neighborhood where this bank branch is located is an area that was historically redlined and has remained segregated by race due to the lasting effects of those policies,” the group wrote.

    In a Feb. 23 response to the Fair Housing Center, the OCC said that it will consider the group’s comments in its next Community Reinvestment Act evaluation of Fifth Third. But it did not commit to holding a public meeting.

    “The bank’s decision to close the branch office is a business decision that does not require the approval of the OCC,” wrote Jason Almonte, the OCC’s director for large bank licensing.

    When asked Monday about the OCC’s view on whether, and under what circumstances, public meetings on branch closures should be held, an agency spokesperson had no immediate comment.

    A Fifth Third spokesperson said that the Cincinnati-based bank is continuously evaluating its branch network, and that it takes into account consumer preferences.

    Fifth Third will keep an ATM at the site of the shuttered branch in Toledo, and customers will be able to use online and mobile banking services, in addition to visiting other Fifth Third branches, according to the spokesperson. 

    “Although we have one location closing in Toledo, we have two additional financial centers within the same zip code to serve customers. Our team has been welcoming and working with those customers as they transition,” the Fifth Third spokesperson said in an email.

    The spokesperson also noted that the OCC gave Fifth Third an ”outstanding” rating on its most recent Community Reinvestment Act examination, which covered 2017 to 2021. Fifth Third said in January that it was planning to close 23 branches in 2023, mainly in the Midwest.

    George Thomas, CEO and general counsel of the Fair Housing Center, said in an interview that Fifth Third’s notices to customers about the branch closure in Toledo did not note that people could submit comments to the OCC about the branch shutdown.

    A provision of federal law states that when an interstate bank proposes to close a branch in a low- or moderate-income area, the notice to customers “shall contain the mailing address of the appropriate federal banking agency and a statement that comments on the proposed closing of such branch may be mailed to such agency.”

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    Kevin Wack

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  • Neobank for Latino immigrants raises $4.5 million in seed funding

    Neobank for Latino immigrants raises $4.5 million in seed funding

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    A challenger bank for Latino immigrants has closed its seed round.

    Comun in New York announced Tuesday that it has raised $4.5 million in seed funding led by Costanoa Ventures with participation from South Park Commons and FJ Labs. Its digital banking app became available to consumers in September. 

    The company was co-founded by two immigrants to the United States from Mexico. Spanish is the default language for the app — which is linked to a no-fee checking account and a debit card — but users can switch to English. Applicants do not need a Social Security number to sign up for an account; instead, they can use an individual taxpayer identification number (ITIN), a foreign passport or another form of official foreign identification and must supply proof of address.

    “We built Comun to make it easier to thrive as an immigrant family in the U.S.,” said Andres Santos, co-founder and CEO of Comun. “My co-founder [Abiel Gutierrez] and I both experienced how challenging it can be to navigate the banking system as immigrants.” 

    Comun’s website defines the adjective “comun” as belonging to, or affecting, the whole of a community. Piermont Bank in New York, which has $448.9 million of assets, provides the underlying banking services for Comun. 

    Santos and Gutierrez will use the funding to expand Comun’s offerings and add more educational content, especially related to financial literacy. Comun makes money via interchange fees. 

    The number of neobanks that are bilingual or Spanish-first has ebbed and flowed in recent years. Dora, a challenger bank developed by the Rye, New York-based credit union USAlliance Financial and three other credit unions, offer bilingual services. It launched in September 2021. Viva First in Lubbock, Texas, bills itself as a Latino-first banking app. Welcome Tech, which builds products and services for immigrant communities in the United States, has a digital banking service called PODERcard that, like Viva First, is bilingual. The website for Crediverso, a financial technology company for Latinos, says that it is launching a banking app for Latino families. But the website for Tend, a neobank that launched in both Mexico and the U.S. in 2021, is no longer operational. 

    Other neobanks, such as Majority, target immigrants more broadly. Of the U.S.-based neobanks reviewed, Comun appears to be the only one whose website defaults to Spanish.

    Traditional financial institutions and other financial services companies have made their own overtures to Spanish-speaking people. For example, Community First Credit Union in Santa Rosa, California, trained its conversational bot to communicate in Spanish as well as English. In September, Square announced that its entire product line would be available in Spanish as well as English.

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    Miriam Cross

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  • A year in diversity: Credit union leaders fight for change

    A year in diversity: Credit union leaders fight for change

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    Financial institutions competing for talent and new markets of consumers have expanded suites of services and adapted hiring practices to reach underrepresented demographics.

    Diversity, equity and inclusion have been top-of-mind for credit union leaders over the course of 2022, driving many to launch campaigns to nurture the next generation of diverse talent through coaching programs, employee resource groups and other initiatives.

    Below are American Banker articles over this past year that showcase how institutions of all sizes are pushing for change.

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    Frank Gargano

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