City Council Special Meeting
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Tracy Cormier, Managing Director of Financial Services
Presentation and discussion regarding the development of a Responsible Banking Ordinance
On August 18, 2020, the DeSoto City Council approved an amendment to the City’s Investment Policy that requires financial institutions that provide depository and other banking services for the City to have a Community Reinvestment Act (CRA) rating of “Satisfactory” for higher. This process was followed during the City’s last issuance of a banking service RFQ issued in 2020.
On September 21, 2021, City Council had a discussion on enacting a responsible banking ordinance. There was a video presented on banking below 1-30, outlining data on how banks service their communities. At the conclusion of the meeting, City Council requested to move forward with this item on future Topical Work Session after staff had time to review practices in other communities and present an option that could be adopted in DeSoto.
The Community Reinvestment Act (CRA) requires the federal financial institution supervisory agencies, in connection with their examinations of certain depository institutions, to assess the institutions' CRA performance. A financial institution's performance in helping to meet the credit needs of its community is evaluated in the context of information about the institution (capacity, constraints and business strategies), its community (demographic and economic data, lending, investment, and service opportunities), and its competitors and peers. Upon completion of a CRA examination, an overall CRA Rating is assigned using a four-tiered rating system. These ratings are: Outstanding, Satisfactory, Needs to Improve, and Substantial Noncompliance.
The National Community Reinvestment Coalition, which advocates for greater reinvestment by banks in low- to moderate-income neighborhoods, has drafted legislation that would expand beyond DeSoto’s current CRA requirement and require greater transparency into how banks that are interested in doing business with the City of DeSoto are serving low- to moderate-income individuals, low income census tracts, and small businesses within the Dallas-Fort Worth-Arlington Metropolitan Statistical Area (MSA).
New requirements could include requiring banks to submit additional data during the RFQ process to show how much lending occurs in low- to moderate-income neighborhoods and lending performance based on specific demographic criteria. The City's investment advisor will be making a presentation to discuss, in part, the distinction between the City's depository bank and banks that only participate in providing competitive investment opportunities. Staff would recommend that any policy relate to the City's depository bank.
There is no financial impact from this Work Session agenda item.
This agenda item is being presented for discussion and feedback purposes with the goal of determining Council support for the presented recommendations. Based on City Council feedback, a Responsible Banking Ordinance may be presented at a future City Council Meeting for consideration.
Responsible Banking Ordinance Background Presentation
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