#bankblack’s successes are certainly impressive, but making black-owned banks economically viable in the long term will require more than just a one-time cash infusion—it’ll require larger and more systemic change.
The decline of black-owned banks began less than 50 years ago, when legislation mandated that white banks serve black customers—an encouraging development, no doubt, but also one that carried significant consequences for black-owned banks. For instance, the 1977 Community Reinvestment Act, which required large banks to meet the banking needs of those in their communities—including low-income residents and minorities—had a major impact on black-owned banks, funneling much of their previous business toward larger, whiter banks, says John Robinson, a sociology professor at Washington University in St. Louis who has studied the intersection of race and banking. “It was a piece of legislation whose heart was in the right place, but it incentivized some of these banks to do more business in black communities, which in turn had the effect of exposing black-owned banks to far more powerful competitors,” he said.
Black-owned banks face challenges that have little to do with race, too. Most of them have had to contend with the difficulty of operating a small, community-centered institution in an age of mega-banks that employ tens of thousands of people, and boast even larger populations as customers. “Black-owned banks tend to be similar to community banks, and I see them—along with community banks and credit unions—as locally-based institutions with a track record of serving working and low-income families—families who would otherwise be subject to redlining and predatory lending,” Robinson said. “These sorts of institutions, including many black-owned banks, are rapidly dying off.”
Since the Great Recession, smaller banks have objected to new regulations put in place by the Dodd-Frank Wall Street Reform and Consumer Protect Act. Though the law was meant to rein in larger institutions, many smaller banks have complained that regulations imposing stricter compliance reporting and heightened capitalization standards (meaning how much money banks must keep on hand) have become crippling for smaller institutions, despite carve-outs for small banks. These banks have seen a wave of consolidation that has also resulted in smaller black banks being snapped up by non black owners. And shrinking customer bases have made it more difficult for some black banks to continue serving their remaining customers, meaning that even those who remained loyal to black-owned banks may have had to seek services elsewhere to satisfy some of their more complicated financial needs.
As activists continue to mobilize against racial injustice, it’s unsurprising that economic protests, like #bankblack, would follow. They are a natural outgrowth of activist movements, as these ideas have been championed by Martin Luther King Jr., Malcolm X, and Marcus Garvey—to name a few—all of whom advocated for supporting black businesses and making economic contributions to black communities and causes.