Promoting Bank Reinvestment and Responsible Lending

ANHD works to hold banks accountable to low-income New Yorkers through the Community Reinvestment Act (CRA) by providing local communities with the resources they need to ensure banks are responsive to their credit needs.

In 2010, we released our second annual State of Bank Reinvestment in New York City report. The report presents empirical evidence that most banks, despite growth in deposits, have reduced their commitment to the city’s low- and moderate-income communities. The report found that despite sizeable profits and growing deposits, most of New York City’s largest banks substantially decreased lending, investment and services in 2009. Overall deposits for the city’s largest banks increased by $39.9 billion (+9.1%) between 2008 and 2009. Despite these gains, the industry as a whole deployed less capital in New York City in every major category of lending and investment. In fact, between 2008 and 2009 alone, there was a 35.8% reduction (-$4.44 billion) in the overall amount of reinvestment committed by 20 of the city’s largest banks. For example, there was a 36.9% percent reduction (-$800 million) in community development lending, a 13.6% percent cut (-$300 million) in multifamily lending, and a 42.9% decrease in home purchase lending. In addition to these quantitative reductions, ANHD found that large banks have increasingly shifted how they approach their reinvestment activities, resulting in policies and programs that are less tailored to respond to local credit needs.

The report provided original, comprehensive data on how banks are serving both residents and neighborhoods through loans, investments and services. Armed with this data, ANHD held meetings with multiple banks to discuss their reinvestment records and expressed our hope and expectation that the institutions would commit to year-over-year improvements going forward.

The annual report’s evidence of retrenchment has helped convince City Council leaders that new tools are needed to reverse these trends. ANHD worked with the City Council leadership in 2010 to draft and introduce the New York City Responsible Banking Act (Int. 485), legislation that seeks to reverse discouraging trends in to banks’ reinvestment activities by encouraging financial institutions to be more responsive to the unique credit needs of the city’s low- and moderate-income communities. This new law will be a strong local compliment to the federal Community Reinvestment Act, and will:

• Focus on banks that are eligible to provide “depository services” to the city.
• Rank banks according to submission of an annual “strategic plan,” which details how they plan to meet the credit needs of local communities as well as an annual “progress report” that states the number and dollar amount of loans, investments, and services provided by the bank.
• Require the city to compile and publicly disseminate the banks’ strategic plans and progress reports so elected officials and community groups can engage with financial institutions about local credit needs.
• Encourage the city to do business with those banks that are the most responsive partners in meeting local credit needs.
Through these efforts, ANHD continues to solidify our role as one of the most credible experts and analysts of CRA activity in New York City and a national leader in developing local tools for creating high impact community reinvestment.