CDBA and NBA Launch New Program to Boost Deposits at Banks Targeting Underserved Communities
The Community Development Bankers Association (CDBA) and the National Bankers Association (NBA) have launched the Advancing Communities Together (ACT) Deposit Program. This initiative aims to channel $35 million from major financial firms into banks serving low-income and minority communities. The deposits are FDIC-insured, with expectations of more funding from corporations, foundations, and universities. Participating firms include Blackstone, BNY Mellon, Warburg Pincus, and IntraFi. The program simplifies the funding process, distributing deposits among over 70 community banks to facilitate lending and promote economic growth in underserved areas. The program is part of a larger effort to leverage $6 billion in Treasury funds to support communities affected by the pandemic.
- Launch of the ACT Deposit Program aimed at underserved communities.
- Initial $35 million commitment from leading financial firms.
- Deposits in the program are FDIC insured.
- Participation from major firms like Blackstone, BNY Mellon, and Warburg Pincus.
- Program simplifies deposit processes for businesses, nonprofits, and individuals.
- Deposits distributed among over 70 CDFIs and MDIs.
- Potential for additional deposits from a broad range of depositors.
- Program supports financial inclusion and economic growth in underserved areas.
- Alignment with Treasury Department's Emergency Capital Investment Program (ECIP).
- The initial funding amount may be insufficient to meet all community banking needs.
- Dependence on additional deposits which are not yet guaranteed.
- Potential challenges in effectively distributing and managing the deposits among many banks.
- Near-market interest rates might not be competitive enough for some depositors.
Insights
The launch of the Advancing Communities Together (ACT) Deposit Program is noteworthy for several reasons. Firstly, the $35 million initial investment signals significant confidence from major financial firms like Blackstone and BNY Mellon. This program aims to direct essential funding to community development financial institutions (CDFIs) and minority depository institutions (MDIs), which typically serve low-income and minority communities. These institutions are often under-capitalized and struggle to attract large institutional deposits.
From a short-term perspective, this initiative could improve liquidity for participating CDFIs and MDIs, allowing them to leverage the $6 billion in capital received from the Treasury Department's Emergency Capital Investment Program (ECIP) more effectively. This could lead to increased lending activities and financial growth in underserved communities, potentially spurring homeownership and small business development.
In the long-term, the program's unique structure, which ensures all deposits are eligible for FDIC insurance, could attract a broader range of institutional and individual investors. The regular reports on fund usage can enhance transparency and build trust among depositors, making socially responsible investments more appealing.
However, it's important to note some potential challenges. The success of the program depends on continuous support from large depositors and the effective management of distributed funds. If these elements falter, the anticipated economic uplift may not materialize as expected. Additionally, while near-market interest rates are promised, they might still be less attractive compared to other high-yield investment options, potentially limiting the program's appeal.
Retail investors should watch how this program evolves, especially regarding the inflow of additional deposits and the distribution efficiency among participating banks. The initial response from the market and subsequent quarterly performance reports of involved CDFIs and MDIs could offer valuable insights into the program's impact and sustainability.
The ACT Deposit Program offers a compelling case study in market-driven social impact. By pooling resources from major financial firms and channeling them into CDFIs and MDIs, this initiative leverages private capital for public good. The program's design, which utilizes IntraFi's ICS service, ensures broad distribution of funds among over 70 participating banks. This innovative approach can amplify the social impact of each dollar deposited.
For investors, the program's emphasis on socially responsible investing (SRI) is noteworthy. The growing trend toward SRI provides a context where programs like ACT can attract significant interest. Depositors looking to align their investments with their values might find the FDIC insurance and transparent fund usage reports particularly appealing.
However, the program's success hinges on its ability to sustain interest and growth. While the initial $35 million investment is promising, continuous inflow from diverse depositors, including corporations, foundations and universities, is crucial. The program needs to demonstrate tangible community benefits to maintain and grow depositor interest.
Furthermore, the near-market interest rates offered might not be attractive enough compared to other, potentially higher-yield opportunities. Investors will need to balance their desire for financial returns with their commitment to social impact.
Retail investors should consider the broader implications of such programs. While direct financial returns might be modest, the social benefits and the potential for positive community outcomes could add indirect value over time. Monitoring the program's growth and its reported impact can offer insights into the effectiveness of socially responsible investments.
Leading Firms Commit
At launch, four major financial firms have deposited
"The ACT Deposit Program created a secure and efficient way for community development banks to attract and retain large institutional deposits," said Jeannine Jacokes, Chief Executive Officer of CDBA, which represents CDFI, MDI, and climate-focused banks. "The support from these firms and future depositors will create a lasting positive impact in underserved areas."
Nicole Elam, President and CEO of the NBA, emphasized the program's benefits: "The ACT Deposit Program offers a streamlined approach for providing essential deposits to minority banks serving the underserved and communities of color. This initiative empowers our members to facilitate homeownership, business growth, and financial stability, contributing to job creation and the overall vitality of communities across America."
The ACT Deposit Program's four founding firms are Blackstone, BNY Mellon, Warburg Pincus, and IntraFi.
Martin Brand, Head of North America Private Equity at Blackstone, said: "Community banks play an essential role in boosting economic growth and job creation across the country. We're pleased to support this innovative partnership to help expand access to capital in underserved markets throughout
"Empowering our clients and partners with solutions to advance a more inclusive economy, and to enable their own sustainability objectives is core to what we do," said Laide Majiyagbe, Global Head of Financing and Liquidity at BNY Mellon. "We are proud to play a central role in the ACT Deposit Program via our LiquidityDirect platform to connect socially motivated investors and community banks to help fuel growth for local communities across the country."
Steven Glenn, Managing Director, Chief Financial Officer, Chief Operating Officer, Warburg Pincus, said the ACT Deposit Program aligns with the firm's commitment to growth investing. "We look for opportunities where our resources can help organizations grow and make a positive change in the communities they serve," Glenn said. "Providing access to reliable financial solutions is an incredibly important service. We are excited about the increased lending and financial inclusion provided by the ACT Deposit Program and look forward to following the program's impact and progress."
Key Benefits of the Program
The ACT Deposit Program simplifies the process for businesses, nonprofits, community organizations, and high-net worth individuals to place at least
The program is powered by IntraFi through its ICS service, which includes 3,000 banks nationwide. This collaboration offers millions of dollars in aggregate FDIC insurance.
Participating depositors can choose a CDFI or MDI as their relationship bank, which will then allocate part of the deposit to other participating banks. This ensures benefits are shared across all banks in the program. Depositors can also choose to spread their funds among all participating CDFIs and MDIs, with all deposits eligible for FDIC insurance.
Why This Program Is Needed Now
CDFI and MDI banks need deposits to leverage the more than
To date, 75 CDFIs and MDIs have joined the program. Deposits in the program will yield near-market interest rates, and depositors will receive regular reports on how their funds are being used to support communities.
The ACT Deposit Program is open to any depositor looking to make a positive impact through socially responsible investments in underserved markets while ensuring their deposits are protected by FDIC insurance.
For more information about the ACT Deposit Program, and a list of its participating banks, please visit the program's website: https://www.intrafi.com/act-deposit-program.
About CDBA
For over two decades, the Community Development Bankers Association has led the community development banking movement, advocating for financial inclusion, racial equity, and economic opportunities in the nation's most economically distressed areas. The CDBA and its member banks are located in 26 states and
About NBA
Founded in 1927, the National Bankers Association is the voice for the nation's minority depository institutions (MDIs), and the only organization focused solely on the survival and strengthening of MDIs. Its members include Black, Hispanic, Asian, Pacific Islander, Native American, and women-owned and -operated banks across the country, all working to help minority and low- and moderate-income communities who are underserved by traditional banks and financial service providers. MDIs are located in 32 states and territories. Learn more at www.nationalbankers.org
About Blackstone
Blackstone is the world's largest alternative asset manager. We seek to deliver compelling returns for institutional and individual investors by strengthening the companies in which we invest. Our more than
About BNY Mellon
BNY Mellon is a global financial services company that helps make money work for the world – managing it, moving it and keeping it safe. For 240 years we have partnered alongside our clients, putting our expertise and platforms to work to help them achieve their ambitions. Today we help over
BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). We are headquartered in
About Warburg Pincus
Warburg Pincus LLC is a leading global growth investor. The firm has more than
About IntraFi
A trusted partner chosen by more than 3,000 financial services companies, IntraFi defines success not by the volume of transactions we enable, but by the quality of relationships we form. Our network, established over 20 years ago, connects institutions of all sizes to help participants build stronger relationships with their customers, fund more loans, seamlessly manage their liquidity needs, and earn fee income. The network brings scale, giving each participant access to tens of billions of dollars in funding, the highest per-depositor and per-bank capacity, and the peace of mind of being able to make large-dollar placements. To learn more, visit www.intrafi.com.
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SOURCE Community Development Bankers Association (CDBA) and National Bankers Association (NBA)
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