Preserving Minority Depository Institutions
Print- Section 308 of FIRREA
- State-Member MDIs
- Partnership for Progress Program
- 2015 Interagency MDI Conference
Partnership for Progress Program
The System supports MDIs primarily through its PFP program. This program is a national outreach effort to help MDIs confront unique business model challenges, cultivate safe banking practices, and compete more effectively in the marketplace. Through this program, the System strives to provide MDIs with resources supportive of sound banking operations.
In 2015, the Board formalized a partnership between the Divisions of Consumer and Community Affairs (DCCA) and Banking Supervision and Regulation (BS&R) to share management of the PFP program and diversify the resources and programing available to MDIs in 2016. This partnership also effectively doubled the resources dedicated to this program at the Board. Prior to this partnership, BS&R took primary responsibility for the PFP program and DCCA staff served in more of an advisory role. However, as the Board continued to learn more about the needs of MDIs, it became apparent that DCCA and its Community Development function could add value to the PFP program and the MDIs. To that end, the two divisions agreed to evenly split staffing of the program and have senior officers from both divisions co-chair the Executive Oversight Committee. 2016 PFP programing will reflect the strengths of both divisions and emphasize coordination between the two functions in the Reserve Bank districts.
Maryann Hunter, deputy director of the Board's BS&R division, and Anna Alvarez-Boyd, senior associate director of the Board's DCCA division, serve as national co-coordinators of the program, while district coordinators from each of the FRBs carry out the program's objectives. Staff from both the Board's BS&R and DCCA divisions have responsibility for program implementation. Further, the PFP Executive Oversight Committee, composed of senior officials from the Board, meets regularly to discuss progress toward program objectives set for each calendar year.
Preserving the Character and Number of MDIs
To preserve the character and number of state-member MDIs, staff from the Board's applications function, if necessary, coordinate with the FDIC to help identify healthy minority banking organizations capable of acquiring or merging with state-member MDIs that are in troubled condition.8 To this end, PFP staff provide the FDIC with a quarterly list of all MDIs under System supervision. The Federal Reserve's application function continues to offer a pre-filing option for banking applications that provide critical feedback on potential issues to help avoid processing delays. Finally, whenever the System receives a proposal involving an MDI or an MDI's holding company, every effort is made to ensure that the institution is preserved and that its future prospects are enhanced.
During 2015, the number of MDIs under System supervision decreased by one. A state-member MDI failed in the middle of 2015. A non-MDI bank acquired the bank through the FDIC's resolution process.
Promoting the Creation of MDIs
The System strives to promote the creation of new MDIs by providing guidance about the regulatory applications process to individuals interested in establishing new minority institutions. Further, the System strives to promote the creation of MDIs by posting articles to the PFP website , which advocates minority bank ownership, informs MDIs of advantageous federally sponsored programs, and promotes community development. These web posts also provide guidance about financial institution development, including information about the process of starting a bank, managing a bank through the de novo period, and growing shareholder value while ensuring safe and sound operations. Further, district coordinators from each Federal Reserve Bank periodically discuss emerging issues, attend conferences, serve on local exam teams during examinations, and collect feedback from MDIs on what they are seeing and how the PFP can provide additional assistance.
Providing Technical Assistance on Emerging Issues
District coordinators from each Federal Reserve Bank meet regularly with MDI management to discuss emerging issues and provide technical assistance, especially to those in troubled condition, to explain supervisory guidance, discuss challenges, and respond to management concerns. Trending topics discussed throughout 2015 include IT/cybersecurity, interest rate risk, capital planning and rules, Bank Secrecy Act and anti-money laundering issues, third-party vendor management, and the Community Reinvestment Act. These conversations aim to help MDIs and provide the PFP with valuable insight and feedback on challenges facing MDIs.
Training, Technical Assistance, and Educational Programs
The System continues to use a variety of tools to support MDIs. The primary tools used by the System to provide training and technical assistance are described on the following page.
References
8. A "troubled condition" for a state-member bank is defined by 12 CFR 225.71 (Regulation Y) as an institution that (i) has a composite rating of 4 or 5; (ii) is subject to a cease-and-desist order or formal written agreement that requires action to improve the institution's financial condition, unless otherwise informed in writing by the Board; or (iii) is informed in writing by the Board that it is in a troubled condition. Return to text
