For those of you who enjoy my blogs that are of a humorous nature, stay tuned in the upcoming weeks. For those of you who like feel good stories about lifting people up, you’ll have to wait. This blog is about business, nevertheless the business of helping people. It’s a blog about the minutia and wrangling behind the scenes in order to get banking investment to the streets in order to have the opportunities to help people. Then, and only then, can I tell the human interest stories that warm our souls.
I had the opportunity to speak with banking regulators regarding what a CDFI (Community Development Financial Institution) does in order to help our region’s citizens to get an ever-needed lift-me-up. It went something like this.
Bank regulators should recognize that the bank’s required compliance of the Community Reinvestment Act (CRA) is in many ways broken. CRA, under the ever-diligent, watchful regulatory eye, has in many instances been reduced to an exercise in “checking a box” as opposed to real, thoughtful change that has positive impact on the people who occupy the marginalized and distressed communities of our region.
As an extreme example, being forced to deploy a bank branch in a distressed community, without lowering the barriers to entry, is fruitless. First, the attitudes and tastes (psychographics) of the community are such that there is no trust for the banking industry. Add to it that without increased risk-tolerance levels, without products that meet people where they are, and without pricing that encourages engagement, the newly opened, multi-million dollar facility basically serves as a monument to what we believe is wrong with CRA – nobody is served (the bank or the community), yet the report card shows improvement enough to quiet the regulatory voices.
The real solution to serving the community many times is already there. A CDFI credit union (like SLCCU) that exists in those St. Louis communities in need, has established trust, and is a high-capacity provider of credit, second-chance products and pricing that aligns with our not-for-profit mission. We are the natural solution as are others just like us. All parties win. The consumer gets affordable main-stream consumer financial services; the banks invest their capital in a much more meaningful and impactful way (pleasing to examiners), and the community witnesses the lift when “all the boats rise.”
Banks require stability and financial strength, and I could not agree more. That’s an examiner’s role to ensure. But, creativity and innovation in using already existing CDFIs as a vehicle to gain CRA credit insures a real impact to a community in need that is both positive and meaningful.
Without sacrificing the tenets to an examiner’s role to ensure safety and soundness, CDFIs seem to be the perfect answer to CRA. Creativity and innovation is encouraged.