How Cities Can Pursue Responsible Banking:

Model City Ordinance to Create Community Reinvestment Requirements for Depository Institutions

October 2010

MODEL CITY ORDINANCE

Prepared by National Community Reinvestment Coalition

 

 

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 National Community Reinvestment Coalition | http://www.ncrc.org | 202-628-8866

 

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Creating Community Reinvestment Requirements in Your City or Town

The model ordinance is designed to increase the amount of responsible loans, investments, and financial services in minority and low- and moderate-income communities through heightened public accountability to municipalities and their residents. In return for receiving municipal deposits, the NCRC model ordinance creates an affirmative obligation for financial institutions to serve all communities, including and especially minority and low- and moderate-income communities, consistent with safety and soundness. The model ordinance is based on laws in Cleveland and Philadelphia as well as a soon-to-be enacted ordinance in Los Angeles.

The ordinance requires institutions desiring to receive deposits from a municipality to submit annual data that includes their home and small business lending, branching and deposits, and community development investments. The institutions will also be required to submit a Community Reinvestment Plan to the municipality, which is a two year plan for lending, investing, and providing banking services to city communities.

 The model ordinance establishes a process that occurs every two years for reviewing  bank community reinvestment performance and making recommendations regarding in which banks to place deposits. A Community Reinvestment Review Committee composed of city officials and community organizations shall review the Community Reinvestment Plans and shall commission a study once every two years, using the data submitted by the financial institutions to rank the community reinvestment performance of banks. Using the findings of the study, the Community Reinvestment Committee will make recommendations regarding which institutions the City should use to do their banking. The Reinvestment Committee shall also hold a public comment period of 60 days on the reinvestment performance of institutions, culminating in a public hearing, before issuing its recommendations. The city would be prohibited from placing deposits or investing in institutions that make or finance predatory home and non-home loans. Financial institutions seeking to become city depositories must swear and sign an affidavit promising to adhere to their Community Reinvestment Plans and pledging to provide responsible and safe and sound loans and other financial products.