Holding Banks Accountable to Communities: A breakdown of Community Benefit Agreements
I grew up in the San Fernando Valley, 290 square miles of urban sprawl in the City of Los Angeles. Throughout the mid to late 20th century, White homeowners fought against the influx of industrial jobs and people of color into their neighborhoods. This, coupled with bank and realtor discrimination, relegated communities of color to high-density industrial regions along railroads, manufacturing plants, and freeways. On top of poor air quality, climate consequences, and deadly health impacts, this intentional segregation excluded communities of color from building wealth, economic mobility, and ultimately thriving.
Today, San Fernando Valley neighborhoods of color, such as Van Nuys, Pacoima, and Panorama City, are listed by the LA Times as the least wealthy, the lowest rate of four-year education, and the most dense, respectively. These regions also fall into the range of “Low Income/Susceptible to Displacement” to “Advanced Gentrification” as designated by the Urban Displacement Project. This is the lasting impact of bank and government policies of neglect and disinvestment.
I imagine a future in the San Fernando Valley where everyone’s basic needs are securely met, everyone can live in healthy places with clean air and water, and everyone has an opportunity to pursue their livelihoods. I imagine a future where people are not pushed out of their communities. I imagine a future where people can pursue homeownership and build wealth. Community benefit agreements can help achieve this.
The Community Reinvestment Act and Community Benefit Agreements
Like in the San Fernando Valley, every major city and level of government throughout the United States actively excluded communities of color from homeownership through redlining and restricted participation in wealth-building programs (e.g. higher education opportunities under the GI Bill). These policies denied communities access to loans and services based on race. Bank and government-led disinvestment created a legacy of poor infrastructure, fueling the racial wealth gap, and leaving communities of color particularly vulnerable to climate impacts.
Congress passed the Community Reinvestment Act in 1977 as a solution to redlining. The CRA obligates banks to serve the needs of low and moderate income communities. Although the civil-rights era legislation fails to explicitly require lending to people of color, it obligates banks to reinvest in the communities they operate in due to their role in widening the racial wealth gap and perpetuating ongoing segregation in our economy. Community benefit agreements are one way banks can fulfill CRA obligations.
What is a Community Benefit Agreement?
A CBA is an agreement negotiated between community members and banks, that ensures banks are held accountable to community development, reinvestment, and fair lending where they operate.
The Greenlining Institute and organizations like the California Reinvestment Coalition support CBA negotiations by engaging banks during mergers and acquisitions. During this process, federal regulators request public comments on how banks can fulfill CRA obligations with strong, forward-looking commitments.
Our process for securing CBAs is based on the Six Standards for Equitable Community Investment, as outlined with more detail in the Greenlined Economy Guidebook. These standards include:
- Emphasize Race-Conscious Solutions
- Prioritize Multi-Sector Approaches
- Deliver Intentional Benefits
- Build Community Capacity
- Be Community-Driven at Every Stage
- Establish Paths Toward Wealth-Building
These standards ensure that CBA goals prioritize racial equity, community, and fair economic opportunity in their business practices, without reinforcing the structures that caused problems in the first place. In partnership with community members, we call on banks to make commitments and establish goals that go beyond CRA obligations, including (but not limited to):
- Community investments and lending in affordable housing, economic development and climate resiliency;
- More small business lending to smaller businesses;
- Mortgages and housing counseling to BIPOC borrowers;
- Special purpose credit programs;
- Developing policies around mitigating the risks of displacement and climate change;
- Philanthropy to BIPOC-led and serving organizations;
- Supplier diversity goals; and
- Increasing board diversity.
Negotiating a CBA
When a bank announces an intent to merge with or acquire another bank, Greenlining follows this process:
- Build a coalition: Greenlining and California Reinvestment Coalition build a coalition of organizations in the specific region that will be affected by the merger or acquisition. This typically includes 40+ grassroots, community-based organizations, such as minority business associations, community development corporations, affordable housing developers and civil rights organizations.
- Determine demands based on what the community wants: The coalition includes specific interests and communities-housing development, small business technical assistance, community development financial institutions, faith-based organizations, chambers of commerce, etc.-that all negotiate with the bank to ensure their communities’ needs are represented in CBA negotiations.
- Meet with bank leadership: We request a meeting with the bank CEO to discuss strategies to meet community needs, and how the merger or acquisition could harm low-income communities and communities of color. For example, bank M&A can lead to branch closures, reduce community reinvestment dollars, and pose a risk to consumers by concentrating assets into one bank.
- Negotiate a mutually-beneficial agreement: We negotiate with bank executives through meetings, public comments, and federal hearings until a CBA is signed. This process can take three to ten months.
In addition to achieving tangible investments, CBAs create opportunities for community members to demand accountability from banks that have harmed their communities. During the negotiation process, we emphasize community control and decision-making by centering those who are most affected by banking policies, and providing a direct platform to express what their communities need from banks. CBAs also establish reporting requirements and follow-up meetings between community groups and bank executives to check on the bank’s progress in meeting the agreed upon goals.
In addition, the CBA is a public document. If banks do not follow through on their commitments, this can be referenced in future CRA exams and merger applications, leading to potential regulatory action.
What could a community benefit agreement bring to my community?
When banks profit off a community, they are required to give back. And the opportunities for communities can be profound.
Prior CBAs have secured broadband access for low-income and rural communities, supported early childcare centers, and built affordable housing. Special purpose credit programs can be established to direct capital to marginalized races and genders. The latest agreement that the California Reinvestment Coalition, National Community Reinvestment Coalition and Greenlining negotiated was with US Bank and totaled $100 billion in community investments over five years. In the future, communities can fight for climate resilience projects (e.g. urban greening, heating & cooling centers) and divestment from fossil fuel companies to protect our communities from the effects of climate change, leverage bank resources to create equitable transportation systems that facilitate climate resilience and address racial injustices, and invest in schools and education.
In northeast San Fernando Valley, CBAs can direct funds to grassroots organizations like Pacoima Beautiful, a group that uses environmental justice projects to improve community health and safety. Pacoima Beautiful received the Transformative Climate Communities grant, a program that prioritizes community leadership and collaborative governance in climate action projects. This grant, authorized by AB 2722 (Burke, 2016), requires a 50% funding match for all Transformative Climate Communities projects. A CBA could allocate money to grassroots solutions through Transformative Climate Communities projects. CBAs offer expansive opportunities to support community-led efforts, redress current and historical structural inequalities, and establish pathways for wealth redistribution.
Looking ahead, we can continue to fight for CBAs that advance racial & economic justice and protect our communities from climate impacts. We can ensure that banks actively direct investments to low-income communities and communities of color and help create a world that is more just, healthy, and equitable.