DALLAS - BankAmerica Corp. chairman Richard Rosenberg said in a speech here Thursday that nonbank financial services firms should be required to invest in their communities.
"We should demand that those institutions that would compete with banks shoulder the same responsibility to their communities as banks," Mr. Rosenberg said at a fair-lending conference sponsored by the Federal Reserve Bank of Dallas.
"With the banking and thrift industries now managing only 25% of the country's financial assets, it is critical that nonregulated financial services providers also help direct capital toward community reinvestment."
After insisting that his competitors should be brought into the market, Mr. Rosenberg acknowledged that Bank of America is making money on its Community Reinvestment Act loans.
In fact, he took exception to criticism that loans to lower-income borrowers aren't performing as well as conventional products.
"As a banker I recognize that there are risks in the low-income market - just as there are risks in every market," he said. "But our job as bankers is the management of risk - understanding the risk, deciding what level is acceptable, underwriting accordingly, and demanding consistent performance."
Proper risk management pays off, he said. BofA has had to charge off just $220,000 of the $600 million in affordable housing loans made during the past five years, he said.
The company's Community Development Bank has seen similar results. Its nonaccrual rate as of April 30 for affordable housing and small-business loans stood at 0.8%, far below the 2.3% average for all California state- chartered banks, he said.
And delinquencies in its low-income Neighborhood Advantage program for loans between 1989 and 1992 are 25% below the rate for the bank's conventional loan program. That amounts to losses of $275,000 over the past two years from a portfolio of 63,000 loans totaling $7 billion.
"I shared these performance figures with you today to show that at least one institution's experience demonstrates that this business, if approached with focus and discipline, can make economic as well as social sense," Mr. Rosenberg said.
Regulators have awarded the San Francisco-based bank with "outstanding" CRA ratings in its last two exams. The bank's chairman, who will be retiring, embraced the revised CRA rules, which focus on a bank's lending, investment, and service.
The investment requirement could prove particularly beneficial, encouraging financial institutions to develop badly needed retail centers in the inner cities, he said.
The service test will force banks to develop more innovative outreach efforts, he said. For example, Bank of America recently signed up for direct deposit 32,000 Social Security recipients who previously were using check cashing services.
"We made it very simple," he said. "The teller stamped the customer's Social Security check with a consent form, the customer signed it, and we sent it to the Social Security Administration."
Mr. Rosenberg also praised the Brownfields Initiative, an Environmental Protection Agency program intended to encourage development of abandoned inner-city industrial sites.
"This initiative, which we strongly support, is enhanced through the new CRA regulation, which gives financial institutions credit for financing the redevelopment of Brownfields sites," he said.
Separately on Thursday, Bank of America announced its 1994 performance under the Home Mortgage Disclosure Act.
The bank reported that home loans to low-income minorities grew 15.8% in 1994, to 5,040. Loans to blacks rose 2.7%, to 2,319 mortgages, while lending to Hispanics increased 6.3%, to 8,074.
Bank of America's overall home mortgage volume fell 11%, to 69,000 loans.
