“If you are not at the table, you are on the menu.”
By Kevin Stein,
Chief of Legal and Strategy
Who says Community Benefits commitments are just for big banks? CVCB creates a strong climate for community banks to serve their communities
Rise Economy was pleased to end 2023 with a novel Community Benefits Commitment from Central Valley Community Bank. The Commitment can be found here.
This Commitment is important because it represents a rare such agreement by a relatively small bank that serves rural communities. We believe it establishes a strong precedent and can serve as a model for other community banks looking to engage with and better serve their communities.
Rise Economy member organizations urged us to engage Central Valley Community Bank when it announced in October that the $2 billion asset bank based in Fresno, and serving the Central Valley, was seeking to purchase the $1 billion asset Community West Bank, headquartered in Ventura and serving the Central Coast.
The commitment includes a lot of strong priorities that reflect the community needs identified by local Rise Economy members, including:
- An increase in small business lending, including increased participation in federal and state loan guarantee programs.
- An increase in community development investment and lending, with a focus on affordable housing.
- Investments in small CDFIs led by people of color and in Community Land Trusts.
- Investments in outreach to Native American communities and a commitment to develop a plan to serve Tribal and Indigenous communities.
- Development of a Special Purpose Credit Program (SPCP) to provide homeownership opportunities to BIPOC homebuyers.
- A commitment not to close any branches as part of this merger, to hire branch staff that represent and speak the various languages of the bank’s communities, and to engage in good faith efforts to open a new branch in an LMI, rural and BIPOC area.
- An average of $500,000 in philanthropy every year.
- Development of a supplier diversity program.
- Re-establishment of the Community Partnership Panel, and meetings with community groups annually.
One of the components of the Commitment that Rise Economy members were most proud of was the bank’s commitment to ”refrain from any new financing of fossil fuel extraction activities, especially expansion projects that would develop and lock in dependence on new fossil fuel infrastructure, either through corporate or project-based finance, subject to compliance with banking rules and regulations.” Rise Economy’s research found that Community West may have financed certain oil and gas extraction companies through the Payment Protection Program. Rise Economy members were eager to urge the banks to move away from the financing of fossil fuels and climate change which harms resident and community health and stability.
We believe this may be the first time a Community Benefits Commitment as part of a proposed merger includes provisions restricting bank fossil fuel finance.
Thanks to Central Valley Community Bank for engaging in good-faith discussions and making these important commitments.
Thanks also to the over 20 Rise Economy member organizations and allies who attended the meeting with the bank CEOs and who helped us negotiate this commitment. Special thanks to Eric Payne of Central Valley Urban Institute, Samuel Molina of the Academy of Financial Education, David Mendoza of Fresno Native American Business Development Center, operated by Asian Inc, and Deborah Muramoto of California Capital FDC for their leadership.
The joint Rise Economy/CVCB press release can be found here.
Help banks identify community credit needs: Proposed Rise Economy bank meetings for 2024
Bank meetings are a uniquely important opportunity for Rise Economy members to talk with bank representatives directly about the needs in their communities, and whether banks are doing a good job in helping to meet those needs. In helping banks identify credit needs in the communities that they are meant to serve, we believe these meetings can be highly valuable to banks and communities alike.
In 2023, Rise Economy held such meetings with Bank of America, JPMorgan Chase and First Citizens Bank. Additionally, we had seven meetings with four banks that had made Community Benefits Agreement commitments to develop, and to discuss, SPCPs.
We also met with Washington Federal and Luther Burbank Savings, Banc of California, First Citizens Bank, and Central Valley Community Bank and Community West to discuss Community Benefits Agreements as part of their bank merger applications.
In 2024, we are planning to meet with the following banks: Mechanics Bank, US Bank, BMO Harris, Wells Fargo and Umpqua Bank.
We also plan to hold one follow-up meeting on an issue of concern with both Bank of America and JPMorgan Chase, as well as begin conversations with Citibank about its response to our letter on bank lobbying and litigation, and our concerns about the bank’s climate policies and fossil fuel finance activities.
And we are prepared to fight for community interests amidst the wave of bank mergers that are predicted for this year.
Finally, we hope to meet with another bank that needs to change its climate-related practices. Which bank is that? Watch this space for more on our 2024 climate campaign.
“At the Table:” Rise Economy members meet with Federal Reserve Vice Chair Michael Barr
Over twenty Rise Economy members met with Federal Reserve Vice Chair Michael Barr in San Francisco and on Zoom in mid-December, providing us an important opportunity to share our perspective on 1) whether banks are actually helping to meet community credit needs 2) the importance of encouraging banks to develop SPCPs and meet the large and unique needs of Native American communities, 3) our initial reactions to the new federal CRA rule, and 4) what the Fed can do to ensure that banks are accounting for climate-related financial risk and not further exacerbating climate change and bluelining our communities.
Rise Economy members have had the pleasure and opportunity to work with Michael Barr over the years in his capacity as Assistant Secretary of the Treasury for Financial Institutions, and we appreciate his work on the Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) and the Community Reinvestment Act (CRA) (1977). Vice Chair Barr currently holds significant authority over bank supervision, the Community Reinvestment Act and the Fed’s approach to climate.
As part of the meeting, Sacramento Environmental Justice Coalition board members Barry Boyd and Elena Raudales spoke to Vice Chair Barr about the housing and environmental concerns plaguing Sac EJC member communities, and later posted that they were “at the table” with the Fed’s Vice Chair, and that “if you are not at the table, you are on the menu.”
CRA Rules: A Slightly Deeper Dive?
Rise Economy continues to pour over the 1,500-page final CRA rule, as new observations largely confirm early assessments that the rule represents an advance over the current framework, but also a tremendous lost opportunity to bring CRA implementation back to its original anti-redlining purpose.
Here are some takeaways thus far:
- The rule sets up a more rigorous lending analysis, will consider bank lending activity beyond branches for the first time, provides clear and expansive credit for banks investing in and partnering with CDFIs and in native land areas, and will provide credit for bank support of broadband and weather resiliency efforts.
- The rule also represents a tremendous lost opportunity to have the CRA better address its original purpose of countering bank redlining of communities of color.
- The rule largely fails to change the CRA’s focus so as to also evaluate banks on their responsiveness to the credit needs of BIPOC borrowers and communities.
- The rule also continues to give banks a CRA-free pass when it comes to engaging in harmful activities like fossil fuel finance, displacement financing and fee gouging.
- The rule allows banks to continue to pass their CRA exams if they engage in discrimination or, for large banks with more than ten assessment areas, fail to serve up to 40% of their assessment areas. According to an analysis by the National Community Reinvestment Coalition, of the 16 banks that most recently entered into redlining consent decrees announced by the Department of Justice, 75% passed their CRA exams, and only 2 banks failed their CRA exams during the relevant time periods (2 more banks were later downgraded after the DOJ’s redlining consent order announcements). We do not see anything in the new CRA rule that would make it less likely that banks will still pass their CRA exams under the nation’s anti-redlining law for lending performance that the Department of Justice later finds to constitute redlining. This must change.
- The final CRA rule reflects very few of the enhancements we suggested were necessary to make the proposal a clear win for communities, and instead gave significant ground to industry concerns.
Yet despite our disappointments and frustrations, we still see the final rule as an advance on the current framework and hope that it will generate more investment in underserved communities. As such, we are concerned by reports that the banks and/or their trade associations may seek to overturn the rule through litigation.
This represents a disturbing trend where banks and their trade associations fight consumer protection, reinvestment, fair lending and climate justice laws and rules, lobbying against them in the legislatures and before regulatory agencies, and suing to beat them in the courts if, despite their vast resources, they lose the policy debate. For our letter to bank CEOs seeking clarity on their positions relating to lobbying and litigation on matters of vital importance to Rise Economy members, click here.
Rise Economy’s initial response to the Rule can be found here. We will continue to review the rule and will finalize a short position paper on the rule in the coming weeks.