By Jill Sung
As policymakers in Washington begin to confront the unique challenges facing minority depository institutions, I was privileged to recently testify before Congress on behalf of ICBA about the declining number of MDIs and the impact on underserved communities. Fortunately, there are solutions to these challenges.
My family's bank—Abacus Federal Savings Bank in lower Manhattan's Chinatown—was founded by my father in 1984 to serve our local community with the loans that others refused to provide. Many MDIs have similar stories of being formed to empower minority and low-to-moderate-income communities by providing access to credit and financial services. With MDIs continuing to serve a crucial role, their decrease from a high of 215 in 2008 to less than 150 today is a significant concern.
As an MDI, we at Abacus face unique challenges, such as language and cultural barriers. We were the only bank ever charged in the wake of the Wall Street financial crisis of 2008. While we were fully cleared after a five-month jury trial, our exoneration does not erase the attack on our community that the prosecution represented. On top of this, we also deal with the challenges facing all community banks nationwide, including regulatory burdens, historically low interest rates, and competition from taxpayer-subsidized credit unions.
As I testified before the House Subcommittee on Consumer Protection and Financial Institutions, policymakers do have opportunities to strengthen the minority banking sector and, hence, low-to-moderate-income communities. For instance, as subcommittee Chairman Gregory Meeks (D-N.Y.) develops draft legislation to support MDIs, policymakers can:
- promote the formation of new MDIs by phasing in capital requirements for minority de novo banks,
- allow MDIs to bid first on acquiring the assets and deposits of failed MDIs,
- promote the Community Reinvestment Act provision encouraging banks to collaborate with MDIs for possible CRA credit,
- design federal programs that inject capital and deposits and provide technical assistance to MDIs, and
- streamline the process for MDIs to become Community Development Financial Institutions and maintain that designation.
Being an MDI is increasingly difficult, but our survival has never been more important to the communities we serve. As laid out in my testimony, there are solutions to help banks like ours continue our missions. Human ingenuity and a commitment to local communities have contributed to our nation's network of MDIs. We can deploy these same principles to help preserve this crucial source of financial services.
Jill Sung is president and CEO of Abacus Federal Savings Bank in New York City and chair of ICBA's Minority Bank Advisory Council and Consumer Financial Services Committee.