Minority-Owned Financial Institutions

Status of Federal Efforts to Preserve Minority Ownership Gao ID: GGD-94-1 November 3, 1993

GAO reviewed how four agencies--the Treasury Department, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the Resolution Trust Corporation--have implemented laws designed to preserve minority ownership of financial institutions and to assist minority-owned institutions and minority investors with acquiring failed institutions. Although the agencies have taken some steps to preserve minority ownership of financial institutions, they have not assessed whether these measures have been successful. GAO believes that periodic assessments of the effectiveness of the current approaches are essential given the goals of the legislation and the mixed views of the minority banking community on the agencies' efforts. In addition, until the agencies evaluate the effectiveness of their current approaches, they remain vulnerable to the perception that they have not done enough to preserve minority ownership of financial institutions.

GAO found that: (1) Treasury, FDIC, OTS, and RTC have taken actions to satisfy the statutory requirements and improve minority ownership in financial institutions; (2) Treasury is facilitating communication between federal regulatory agencies and RTC, FDIC is preserving minority-owned banks under its normal supervisory and resolution policies and procedures, OTS is helping existing institutions remain viable and profitable through its supervisory process, and RTC is extending preferences to minority bidders of failed thrifts and offering capital assistance to winning minority businesses; (3) the regulatory agencies believe that their efforts have had a positive effect on preserving minority ownership and increasing the overall size and number of minority-owned banks; (4) between 1989 and 1993, the number of minority-owned banks increased and the number of nonminority-owned banks decreased; (5) 12 of the 26 financial institutions that RTC has resolved are minority-owned banks; (6) the minority banking community believes that federal actions could be increased and regulatory agencies have not proactively satisfied the statutory requirements; and (7) minority-owned businesses suggest that federal agencies can improve examiners' sensitivity toward the unique circumstances of minority-owned financial institutions, provide more technical assistance, and help minority-owned financial institutions gain access to needed capital.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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