New FDIC economic inclusion program blends inclusion and community development

FDIC Chairman Martin Gruenberg said the agency’s new economic inclusion strategy plan will prioritize banks’ efforts to build trust in the communities where they operate.

Shen Ting/Bloomberg

WASHINGTON — The Federal Deposit Insurance Corporation on Thursday released a revised Economic Inclusion Strategy Plan designed to promote personal financial stability by encouraging lending to underserved communities.

The agency’s updated blueprint, released a decade after the original draft, highlights four areas of opportunity: building banking relationships, saving and building credit, developing small business and affordable housing growth, and encouraging bank activity in underserved communities .

In what FDIC Chairman Martin Gruenberg called the “biggest change” to its economic inclusion strategy, the agency will urge banks to strengthen community development initiatives such as affordable housing, small business lending and investments in financial institutions that work with minorities, women and Low-income people.

“While the FDIC has long sought to support banks’ community development efforts, an explicit link to their economic inclusion efforts is new and entirely appropriate,” Grunberg said Thursday at the National Community Reinvestment Alliance’s annual conference. Frankly, this plan recognizes that banks cannot succeed in building trusting relationships with families if they neglect to invest in strengthening the communities where these families live and work.”

Financial Health Network President and CEO Jennifer Tescher said the focus on specific outcomes, such as building savings, credit and wealth, is an important revision of economic inclusion plans. While the share of unbanked and underbanked households has declined from 28% in 2011, Tescher said it will reach 18% by 2021, according to the FDIC, and financial security requires more than a bank account.

“What’s most noteworthy about this new program is its focus on outcomes,” Tescher said. “I’m really pleased that the FDIC is focusing the program around these four key areas that are critical to achieving financial well-being.”

The new plan comes after the FDIC, Federal Reserve and Office of the Comptroller of the Currency involved in a legal action When they Trying to Introduce Updated Community Reinvestment Act RulesThe CRA was first passed in 1977 to prevent discriminatory banking practices by requiring banks to invest in low- and middle-income areas where branches are located.

On Thursday, Grunberg said the FDIC was “firmly committed to supporting” the new CRA, which he added would help ensure consumers can get the services they need at affordable prices and encourage bank investment. in community development financial institutions, minority depository institutions and women’s depository institutions.

As part of the revised Economic Inclusion Plan, the FDIC will monitor its progress in advancing community development through bank investments and participation in Community Reinvestment Act-related activities.

Tescher said the FDIC’s new strategy recognizes the important interplay of individual needs and community needs in financial health.

“In the past, economic inclusion plans were about people, while CRA was about places.” The teacher said, “Now economic inclusion plans truly combine people and places.”

Tescher, who serves on the FDIC’s Economic Inclusion Advisory Committee, said her involvement in the development of the agency’s new strategic plan was limited to providing feedback on a previous draft and her thoughts on an updated version.

Last fall, the FDIC Office of Inspector General According to reports, the 2019 draft The content of the plan is adequate but lists 14 recommendations for improvement, including more self-assessment and bank feedback. Some of these recommendations, such as outlining a framework for assessing progress and outlining an action plan to achieve its goals, are made explicit in the FDIC’s draft update.

In his speech Thursday, Grunberg also highlighted specific financial products that can help “lay the foundation” for financial stability and reduce the number of unbanked households. Accounts designed to limit the risk of overdraft fees weren’t widely available a decade ago, Grunberg said. , but now at least 340 banks offer it. Gruenberg added that banks offering small loans are expected to increase, which could provide a way to build good credit and provide an alternative to payday lenders and other non-bank institutions.

At the NCRC meeting, the FDIC Chairman added that the agency hopes to successfully execute economic inclusion strategies in partnership with groups representing the unbanked and underbanked populations.

“We recognize that the FDIC will not succeed on its own,” Grunberg said. “We recognize that the FDIC will not succeed alone. Support from other federal, state and local agencies, community organizations, local leaders, bankers, educators and others Very important.”

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