Abstract
The lagging development of many minority communities has had an adverse effect on economic growth in the United States. One factor historically associated with creating or exacerbating this minority problem is the unwillingness of banks to service minority communities adequately. The federal government used two initiatives to address banks' reluctance to aid minorities: the Community Reinvestment Act (CRA) that ended the practice of redlining and required all federally regulated banks to demonstrate that they served the convenience and credit needs of their local communities, particularly minorities, women, and other underserved groups, and the establishment and preservation of minority owned banks that were expected to be more sympathetic to the needs of their communities. This paper evaluates the extent to which minority banks have met the needs of minority communities. The assessment is conducted in the context of the ratings received by minority banks on their Community Reinvestment Act (CRA) audits. Through the use of CRA audits, the performance of minority banks is also compared to the performance of the general banking community to determine the validity and success of the government's minority banking initiative. Analysis of CRA audit ratings also compares the performance of minority banks among different ethnicities.
Similar content being viewed by others
References
Allison, M. “Own Race Not a Factor, Lender Study Says,”Chicago Tribune, June 16, 2002, Section 5, p. 2.
Barefoot, J. S. “July 1 nears. Is your CRA program ready?”ABA Banking Journal, LXXXII, No. 6, June 1990, pp. 43–45, 47.
Benston, G. J. “The Community Reinvestment Act: Looking for Discrimination that isn't There,”Cato Policy Analysis, 354, October 6, 1999, http://www.cato.org/pubs/pas/pa-354es.html.
Feldman, R. E. “Policy Statement Regarding Minority Depository Institutions,” by order of the Board of Directors of the Federal Deposit Insurance Corporation, April 9, 2002. 8 pages.
Griswold, M. C.; Karels, G. V.; Peterson, M. O. “Racial Characteristics of Employees and Customers at Minority Owned and Nonminority Owned Banks: Self-Selection or Discrimination?” http://www.sbaer.uca.edu/Ressearch/1999/WDSI/99wds215.html.
Kim, B. “Disparate Loan-Denial Rates Can Be Justified,”The News-Sentinel, August 15, 1997. http://www.stats.org/statswork/redlining.html.
Traiger, W. W. “CRA Must Go Beyond Bricks and Mortar,”American Banker, 19, 12, May 16, 1991, p. 4. “The Background of the Credit Reinvestment Issue,” inA Compliance Guide for the Community Reinvestment Act Background & Implications, Published by Consumer Bankers Association, pp. 6–17. http://www.ffiec.gov/cracf/crarating/main.cfm. http://www2.fdic.gov.crapes.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Matasar, A.B., Pavelka, D.D. Minority banks and minority communities: Are minority banks good neighbors?. International Advances in Economic Research 10, 43–57 (2004). https://doi.org/10.1007/BF02295576
Issue Date:
DOI: https://doi.org/10.1007/BF02295576