7 ways banks and regulators are addressing diversity

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

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 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