|
Big banks fall short
|
 |
July 1, 1998: 5:45 p.m. ET
Larger banks less likely to lend to small businesses in low-income communities
|
NEW YORK (CNNfn) - Big banks are much less likely than their smaller counterparts to provide loans to businesses in low-income and minority neighborhoods, according to a recent study of the Chicago area.
Of the five bank holding companies with more than $10 billion in assets in Illinois, only one -- the LaSalle Banks -- provides loans in low-income communities at a better rate than the overall market, according to the Woodstock Institute, an organization specializing in community reinvestment and economic development.
Three out of five of the banks (Harris Banks, Northern Trust, First Chicago) provide only 6 to 12 percent of their loans in low-income neighborhoods and Bank America makes few small business loans in the metropolitan Chicago area at all, the study reported.
Smaller and medium-sized institutions with branches in or near poor communities serve these areas at substantially higher rates. The five banks making the highest proportion of their loans in lower-income areas all had under $1 billion in assets as of 1996. Each of these institutions made more than 30 percent of its loans in low- and moderate-income communities.
Overall, the loan-per-business rate for upper income neighborhoods is 40 to 50 percent higher than for low-income areas, based on Federal Reserve data.
The growing trend toward consolidation in the financial services industry threatens to further limit access to capital and credit in low-income communities, according to the study. Larger financial institutions tend to rely more on automated lending techniques which dismantle the personal relationships critical to small businesses in these neighborhoods.
"These new nationwide banks must work with local communities to improve their record in serving these important small business markets," said Dan Immergluck, principal author of the report.
"Regulators should not approve a merger unless serious attention is paid to this key aspect of community reinvestment," he added.
The study also cited the importance of small business lending to the viability of low- and moderate-income communities.
|
|
|
|
|
|
Woodstock Institute
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
