Minority-owned banks have an opportunity to increase their lending to minorities because mainline banks do not realize the market's potential, said Federal Reserve Governor Lawrence Lindsey.
In a keynote speech at the 65th annual convention of the National Bankers Association earlier this month in New Orleans, Lindsey said that "the prospects for minority banking are bright."
But many bankers, he added, fail to go after the market because of "myths" about minority-group borrowers.
Income among blacks and other minorities are rising, but bankers find it "difficult, costly and time-consuming to change" their perceptions, Mr. Lindsey said.
The NBA is a Washington, D.C.-based trade association for banks owned by minority-group members and women. It has 62 member institutions.
Mr. Lindsey told the group that the median income of black families rose at a higher percentage rate than that of white families when adjusted for inflation.
"The situation is likely to get better in the next generation," he added.
The Fed governor also said that regulators should encourage banks to expand their business efforts in minority areas.