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May 2, 2015

Why There Are Only 25 Black-Owned Banks Left in the Country

Black bank officials

There were 48 banks in the U.S. in 2001 that were owned by blacks, but according to the Federal Deposit Insurance Corporation (FDIC), that number is now down to just 25. What's going on? The truth is, they are suffering right alongside other community banks.

Community banks, including those owned by blacks, are down

Most banks owned by blacks are smaller, community banks that serve the needs of those who might not otherwise be able to get financial help. Since 2010, these banks have been on the decline. Much of it is due to all the regulations that have been imposed on all financial institutions by the Dodd-Frank Act, created by the government and regulated through the Treasury Department, which established a Financial Stability Oversight Council to oversee all financial institutions. The Dodd-Frank Act pushes financial product standardization, making credit and banking services more expensive for small businesses.

Why black-owned banks are declining more

However, the FDIC believes their decline is worse due to other factors. Because many of them serve customers within challenging markets, they have larger expense ratios than other banks. In addition, many have not kept up with technology in the banking industry, which is important to customers today.

The Dodd-Frank Act was the government's attempt to protect the financial market, following the real estate crises that hit America in 2008-2009. But it has not had a positive affect on smaller, community banks, especially those owned by blacks and other minorities.

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