The Federal Deposit Insurance Corp. plans to unveil a new investment fund to give stakeholders a way to channel capital for banks and support minorities, CNBC reported.
The Mission-Driven Bank Fund, as it’s called, plans to invest only in banks working with minority, low-income and rural communities, which often don’t have the same access to long-term capital, according to the report.
“One of the things that I heard in the beginning, and in particular for Black banks, was a lack of capital,” FDIC Chair Jelena McWilliams told CNBC. “Finding good capital to come to the banks was the No. 1 thing.”
McWilliams added that the early work she had done with banks for the fund included talking with small bank CEOs, assessing how the federal government could help them build homeownership and business creation in minority communities.
“This fund is supposed to leverage the investments from others under the brand of the FDIC,” she said, per the report, “and then allow every dollar to be multiplied exponentially for the benefit of homeowners and small businesses and credit in the communities where it is needed the most.”
The project is the latest effort from the government to support minority-owned banks, which have seen failed loans, larger merger-and-acquisition-fueled competition and financial downturns, according to the report.
The fund also comes employs new consideration of how to support minority-owned banks focused on the community, which need long-term “patient” capital, the report stated.
With longer-term investments including equity or debt financing, lenders will have more leeway on lending capital to borrowers at a profit. That, CNBC noted, is the main money-maker for consumer and smaller-business banks.
In other news, financial institutions (FIs) can help soothe the needs of the unbanked or underbanked by enabling real-time payments along with verifiable identification and more encouragement to open new bank accounts.
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