Capital Savings Bank opened shop in Washington in 1888, making it the nation’s first black-owned bank at a time when the mere notion of offering financial services to the African American community was a novel idea. Now black-run banks are in a fight for survival, even though many advocates argue that many African Americans remain starved for banking services.
The Federal Deposit Insurance Corp. counted 25 black-owned banks remaining in the country last year, down from 48 in 2001. That decrease came even as the overall number of minority-owned banks increased slightly, going from 164 to 174. In addition, the majority of black-owned banks that remain open are on shaky ground and struggling to hold on in the face of the economic devastation that has ravaged many of their customers. Analysts say 60 percent of black-run banks lost money in 2013.
“I would venture to say that [the vast majority of black banks] are in varying degrees of trouble,” said Darrell Jackson, chief executive and president of Chicago’s Seaway Bank, a black-owned bank celebrating its 50th anniversary.
Black-run banks have been struggling for years, as mainstream institutions increasingly picked off their best-heeled customers. The increased competition came amid what some call a string of strategic blunders.The banks, historically headquartered in the heart of traditional black communities such as Chicago’s South Side, New York’s Harlem and Washington, D.C.’s Shaw, failed to modernize their services. Few offered the branch networks, computerized banking and other automated services that have come to dominate the business. And many of the banks failed to follow the African American middle class to the suburbs.
Taken together, black banks control just $5 billion in assets, a tiny fraction of the size of the nation’s banking behemoths, such as Wells Fargo, which by itself has some $1.7 trillion in assets. Black banks tend to be small even by the standard of minority owned banks, which as a group had some $181 billion in assets at the end of 2013, according a FDIC report.
Source: Washington Post | Michael A. Fletcher