7 ways banks and regulators are addressing diversity and inclusion

7 ways banks and regulators are addressing diversity

May 26, 2022 10:59 AM

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From a proposed update of 1977’s Community Reinvestment Act to the launch of an AI-powered bot with a Spanish-language option, significant changes in the banking industry are having a dramatic impact on diversity, equity and inclusion.

Here are seven recent developments that highlight how banks and regulators are adopting a more progressive agenda.

Regulation and compliance

The 1977 Community Reinvestment Act, which aims to prevent discriminatory redlining practices that unduly impact ethnic minorities and low-income residents, is set for an overhaul after much agency infighting between the Fed, FDIC and OCC.

Among other provisions, the update will redefine the types of data banks must provide to the three agencies to address the issue of income inequality that became even more clearly apparent during the pandemic, said OCC senior deputy comptroller for bank supervision policy Grovetta Gardineer.

While the specific details have yet to be finalized, the goal for regulators is to “have a level playing field” with “the agencies speaking with one voice,” Gardineer said.

Read more:

Regulators expect to release CRA revamp as soon as this month

Credit unions

A survey of 500 Black- and Latinx-owned businesses conducted by Color of Change and UnidosUS in April and May of 2020 found that only 12% received full PPP assistance.

“The banking sector doesn’t see half of the country or even more,” said Pablo DeFilippi of the Inclusiv Network, an association of credit unions serving economically disenfranchised communities. “This system doesn’t work for everyone, and especially doesn’t work for low-income people and especially hasn’t worked for people of color.”

While certain financial institutions are working to lend deeper into neglected communities, banks and credit unions need to do more or they will be pushed out of their markets by organizations that are better at serving these communities.

Read more:

Lenders warned they risk irrelevance if they’re not inclusive

Community investment

Community investment pledges are often regarded as deals laying the groundwork for a large merger, however Truist sees it differently. The bank is preparing a $60 billion plan covering mortgages, small business loans and other investments in low-income areas.

“Truist is going to do [this] not because we have regulatory issues or necessarily a merger acquisition,” said chief CRA and community development officer Anthony Weekly. “This should be guided by who we are, and how we serve the community.”

The NCRC has also been encouraging banks to renew their plans. “Several of our bank partners have proactively approached us to update their commitments,” said CEO Jesse Van Tol. “They see it as a valuable framework to measure their progress in serving the community, including their efforts towards racial equity.”

Read more:

Why Truist is working on a new community investment pledge

Regulation and compliance

Financial institutions are re-evaluating how they will approach fair lending in light of a major CFPB policy change on discrimination in a range of consumer financial products, including payments, deposit and checking accounts, and prepaid cards, which go well beyond traditional credit.

“We will be expanding our anti-discrimination efforts to combat discriminatory practices across the board in consumer finance,” said CFPB director Rohit Chopra.

Taking the view that discrimination on the basis of age, race or sex violates the federal prohibition on “unfair, deceptive or abusive acts or practices,” the CFPB vowed to use its UDAAP powers to end discrimination in all consumer financial segments.

Read more:

CFPB expands its authority to punish banks for discrimination

Credit unions

From thirty-seven people in its first meeting in 2020 to more than 1,200 members today, CU Pride has become a thriving, and growing, organization that aims to give a voice and face to the LGBTQ+ community in the credit union world.

In an effort to go beyond showing diverse couples in print and TV ads, CU Pride was launched in June 2020 by Linda Bodie, CEO of Element Federal Credit Union, and Zach Christensen, director of diversity, equity and inclusion and communications at Mitchell Stankovic.

“This isn’t just about having a conversation about diversity. This is about your employees. This is about your members, your community that you serve,” Christensen said. “Now we’re having the conversations and people feel safe, they feel good, they’re able to show up as their authentic selves.”

Read more:

No longer invisible: The rise of CU Pride

Regulation and compliance

Fewer headline-grabbing issues with bigger “kitchen table” impact, and ensuring the financial system is “fairer for everyone and more sustainable,” encapsulate the mission of Adrienne Harris, New York’s new head of the Department of Financial Services.

While still going after large banks that abuse the system, as the first Black woman to run the agency Harris brings a new perspective to its agenda, which she intends to focus on addressing long-standing racial and economic disparities.

“We’re going to ask hard questions and really make sure that the financial system is working for the people that it’s intended to serve,” Harris said.

Read more:

New York’s top bank regulator pledges focus on ‘kitchen table issues’

Credit unions

Hispanic people represent 25% of the population in Community First’s target market area in Northern California. So, launching an AI-powered bot named Maggie with a Spanish language option to expand call center operations has been vitally important for the credit union.

“We created a persona that corresponded to our roots and our ethos of doing good in the community,” said Community’s chief marketing and HR officer David Williams. “Since our membership and staff skew towards women and we were founded by teachers, Maggie is female and a teacher.”

This attention to detail is paying off and helping Community find its audience. By February, there were 2,937 total Maggie users, of whom 2,584 were using English and 353 using Spanish.

Read more:

How a California credit union taught its English-speaking bot to speak Spanish