Which Banks are Meeting the Credit Needs of Our Local Communities?

New State of Bank Reinvestment in NYC: 2012 Report Analyzes the Facts.

 The Association for Neighborhood and Housing Development (ANHD) is releasing the State of Bank Reinvestment in NYC: 2012 report.  This is the latest version of our annual report analyzing how banks meet neighborhood credit needs and the local impact of the Community Reinvestment Act (CRA). The CRA states that banks have an affirmative obligation to help meet the credit needs of the low- and moderate-income neighborhoods in which they do business.  Long before banks were ever considered too big to fail, they were understood to be too important to fail.  The social compact between banks and the government is that the lending, investments, and services that banks provide are crucial to the health of our communities and our economy.  You only need to look at photos of the “burning Bronx” in the 1970’s to see what disinvestment looks like and to understand that readily available and sound lending is the lifeblood of a healthy housing market and community.  The fundamental principle of the CRA is that in return for the very valuable publicly-backed benefits banks receive, they must incorporate a significant measure of community reinvestment activities into their business models in order to help meet local credit needs.   The CRA has enormous potential to revitalize communities, as evidenced by the over 300,000 units of affordable housing that were financed over the past three decades with public subsidies leveraging private bank investments.  The CRA is a powerful tool that not only reflects on a banks’ public image, but also impacts their ability to merge, acquire other banks, and open/close branches.   Unfortunately, major bank consolidation, coupled with legislative changes has weakened the CRA considerably.   CRA exams now take place only once every 2-5 years  and often cover very large geographic areas.  ANHD’s annual report fills in the gaps by examining key activities in New York City that our communities need to thrive: home purchase and multifamily apartment lending, community development lending and investments, philanthropy, and small business lending.  The banks are ranked against their peers on a wide range of indicators, which are then compiled to generate an overall ranking.  We believe that the individual and overall rankings, together with the detailed analysis, are a good representation of the totality of CRA activities.  These can then serve as a resource for bank regulators, community organizations and the banking industry to better understand where banks need to improve, as well as identify best practices that should be continued and increased, thus raising the bar for the whole industry.   After two years of steady decline, ANHD is pleased to report that reinvestment is up once again, but not nearly at the levels needed to truly help meet the credit needs of working-class and low-income New Yorkers.  In 2010, 23 banks held over $590 million in deposits and reinvested just 1.35% of that ($7.9 million) in lower-income communities.  Additionally, the Big Four banks collectively are not pulling their weight; they hold 61% of deposits yet account for just 45% of reinvestment activity in the city. Of the 23 banks tracked in the report, Citibank has emerged as a leader in good community development, as evidenced not only by their large increase in community development investments and lending, but also in the thoughtfulness and intentionality of these investments.  They spearheaded a landmark deal to preserve over 14,000 units of public housing and invested $100 million to preserve housing put at-risk by speculative predatory equity investors looking to make a profit by evicting and neglecting lower-rent paying tenants. On the other end of the spectrum is Bank of New York Mellon.  As a result of a merger between the previously well-respected Bank of New York and the out-of-state Mellon Bank, we have seen a marked reduction in focus on the NYC market.  The new Bank of New York Mellon has demonstrated little interest in community development in our city and lacks the intentional qualitative aspects that mark a serious institutional commitment.