Minority Banks: Regulators Need to Better Assess Effectiveness of Support Efforts

GAO-07-6 Published: Oct 04, 2006. Publicly Released: Oct 04, 2006.
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Highlights

Minority banks can play an important role in serving the financial needs of historically underserved communities and growing populations of minorities. For this reason, the Financial Institutions, Reform, Recovery, and Enforcement Act of 1989 (FIRREA) established goals that the Federal Deposit Insurance Corporation (FDIC) and the Office of Thrift Supervision (OTS) must work toward to preserve and promote such institutions (support efforts). To evaluate their efforts, as well as those of the Office of the Comptroller of the Currency (OCC) and the Federal Reserve, GAO (1) reviewed the profitability of minority banks, (2) identified the regulators' support and assessment efforts, and (3) obtained the views of minority banks on the regulators' efforts. GAO reviewed financial data from FDIC, interviewed regulators, and surveyed all minority banks.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Federal Deposit Insurance Corporation The Chairman of the FDIC, the Director of OTS, the Comptroller of the Currency, and the Chairman of the Federal Reserve should regularly review the effectiveness of their minority bank support efforts and related regulatory activities and, as appropriate, assess the need to make changes necessary to better serve such institutions. In conducting such reviews, regulators should consider conducting periodic surveys of such institutions to determine how they view regulators' minority bank support efforts and/or developing outcome-oriented performance measures to assess the progress of their efforts in relation to program goals.
Closed – Implemented
OCC has conducted a survey of minority institutions and used the results to provide guidance to staff working with such institutions, such as in providing technical assistance.
Federal Reserve System The Chairman of the FDIC, the Director of OTS, the Comptroller of the Currency, and the Chairman of the Federal Reserve should regularly review the effectiveness of their minority bank support efforts and related regulatory activities and, as appropriate, assess the need to make changes necessary to better serve such institutions. In conducting such reviews, regulators should consider conducting periodic surveys of such institutions to determine how they view regulators' minority bank support efforts and/or developing outcome-oriented performance measures to assess the progress of their efforts in relation to program goals.
Closed – Implemented
OTS has conducted a series of meetings with minority banks to obtain feedback on the agency's efforts and has instituted a survey of minority owned banks to obtain further suggestions for improving its outreach. OTS will also begin to seek input from minority banks through its Thrift Satisfaction Survey.
Office of Thrift Supervision The Chairman of the FDIC, the Director of OTS, the Comptroller of the Currency, and the Chairman of the Federal Reserve should regularly review the effectiveness of their minority bank support efforts and related regulatory activities and, as appropriate, assess the need to make changes necessary to better serve such institutions. In conducting such reviews, regulators should consider conducting periodic surveys of such institutions to determine how they view regulators' minority bank support efforts and/or developing outcome-oriented performance measures to assess the progress of their efforts in relation to program goals.
Closed – Implemented
In response to this recommendation, the Federal Reserve has met with 25 minority and new bankers to obtain their views on a training program that it is developing to assist these banks. According to Federal Reserve officials, the training program is structured to provide banks assistance in key areas such as maintaining shareholder value. A Federal Reserve official has also stated that the agency will continue to meet with minority bankers as the training program is implemented to discuss its effectiveness.
Office of the Comptroller of the Currency The Chairman of the FDIC, the Director of OTS, the Comptroller of the Currency, and the Chairman of the Federal Reserve should regularly review the effectiveness of their minority bank support efforts and related regulatory activities and, as appropriate, assess the need to make changes necessary to better serve such institutions. In conducting such reviews, regulators should consider conducting periodic surveys of such institutions to determine how they view regulators' minority bank support efforts and/or developing outcome-oriented performance measures to assess the progress of their efforts in relation to program goals.
Closed – Implemented
The Federal Deposit Corporation (FDIC) surveyed its minority banks in December 2007. The survey requested feedback on FDIC's minority bank efforts for all minority banks and for input from FDIC-supervised minority banks on their interactions with FDIC staff and on their technical assistance efforts.

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