WORD ON THE STREET: While community banks of all kinds are facing difficult tests in the current environment, minority institutions face especially severe challenges. Minority depository institutions (MDIs) do business in areas that other financial providers often ignore. Attracting talent and capital can be a challenge, and finding creditworthy borrowers can be difficult as well. The loans MDIs book often have higher levels of risk, reflecting the critical role your institutions play in being the entry point for a business or a consumer in obtaining credit.
I read the letter that the National Bankers Association (NBA) sent to President Obama earlier this year, and I was struck by the strong commitment it voiced for serving underserved communities, even at the expense of increased earnings. ‘Simply put, MDIs are often the lifeblood of their communities,’ the NBA wrote. I agree wholeheartedly.
So, while MDIs are all community institutions, they are far from being typical community banks or thrifts. That's why their mission deserves special consideration and support.
Congress has recognized that distinction in requiring the banking agencies, including the Office of the Comptroller of the Currency (OCC) for the first time, to offer special support to MDIs. We are doing many things at the OCC to provide that support, but I'd like to highlight one in particular.
We have almost finished the work necessary to set up the Minority Depository Institution Advisory Committee, an initiative that will bring together representatives from minority-owned banks and thrifts around the country with senior OCC leaders for regular conversations about the important issues facing your industry. This group will provide a forum for discussion of issues, and hopefully, for recommendations to address the industry's concerns.
The composition of the committee will be quite diverse, with banks and thrifts that represent various sectors of the minority community, including African-American, Asian, Native American and Hispanic institutions. It will also include a large bank representative, which I think will prove very helpful. Our large banks can be a source of support for minority institutions, and we will be looking to that sector for creative approaches to a number of the problems minority institutions face, including funding and lending activities.
Many of the issues coming before the committee will be difficult, and they won't lend themselves to easy solutions. I don't think there's any surprise there. But I don't want this committee to shy away from tough issues. In fact, that's the principal reason for creating a group like this: To raise and address the difficult issues that aren't getting solved through existing channels.
On a number of the issues raised in the NBA's letter, I do think the OCC is doing a good job. For example, the letter to the president cites frustrations with the current system for classifying loans, and the process for appealing examiner decisions. I'd like to spend a few minutes on both issues.
First, the examination process necessarily involves judgment, and that's one reason we are so selective in our hiring and so rigorous in our training. We want examiners who can make decisions about how rules developed in Washington, most often through an interagency process, should be applied to individual institutions scattered across the country. We at the OCC do not believe that one size fits all when it comes to supervision, and so we tailor supervisory strategies to meet local circumstances.
The MDIs who are supervised by the OCC have the benefit of all of the resources that a national organization can bring to bear, but you also have the benefit of our local presence – the examiners who live and work throughout the country, and who understand local conditions and the specific circumstances of each of the institutions they supervise.
For those MDIs who are national banks or federal thrifts, I would urge you to reach out to your portfolio manager and the assistant deputy comptroller for your area when you have questions or when you are looking for help. These are seasoned supervisory personnel who live in and around your communities. They have the expertise and experience to provide technical assistance. They understand your local markets, and they are able to tailor supervisory strategies to meet your needs, consistent with safety and soundness.
Still, there will be times when legitimate differences of opinion over an exam decision will arise. I know that community banks generally worry any effort to appeal an examiner's decision will result in retaliation. I want to assure you that we have done everything possible at the OCC to keep that from happening.
Thomas J. Curry is Comptroller of the Currency. This article is adapted and edited from remarks delivered before the recent annual convention of the National Bankers Association. The original text is available online.