Here we go again! Banks are back at it, crying foul to new regulations, in return telling some of their largest clients to take their money elsewhere, or be slapped with huge fees. The large financial institutions, including J.P. Morgan Chase & Co., Citigroup Inc., HSBC Holdings PLC, Deutsche Bank AG and Bank of America Corp, have stated that the new regulations have made some of these deposits less profitable. For most banks, deposits have been the usual catalyst for driving growth: more deposits allow banks to loan out more money and bring in more profits. However, with tighter regulations and a smaller amount of loans being generated, banks are beginning to see large deposits as dead weight. This mindset has led to these decisions, decisions that have taken a turn away from some of the fundamental principles and actions typically associated with banking. First and foremost, deposits have usually been seen as the key driver for banks since there is a lower interest rate on money kept in-house and then loans can be made at a higher interest rate. The new rules given by regulators to make our financial systems safer require more cash on-hand so that banks are more resistant to shocks like those seen during the financial crisis of 2008. Many banks feel as if these regulations carry too much liability.
Historically, banks’ fundamental purpose was to serve the credit and banking needs of local communities. While things have changed such as the services offered or the speed of these services, the principle responsibility still remains. Banks put a community’s surplus funds (deposits and investments) to work by lending to people to buy homes and cars, to start and expand businesses, to put their children through college, and for countless other purposes. While times have changed, the central focus shouldn’t. We must develop comprehensive strategies that allow maximum community development, while ensuring our communities are safe guarded from predatory practices or financial crises.
Last week, the Community Development Amendment Act of 2013 passed the District Council; this bill encourages banks who do business with the District to make plans to meet the banking needs of all District residents. There will be a chance for the public to weigh in on banks’ plans and progress once implementation begins in early 2016. We hope for good faith banking partners in the District and a chance to champion improved banking services and products for District residents and neighborhoods that need it the most.