Banks’ Early Responses to Assist Low-income Communities during the Coronavirus

June 1, 2020

At the San Francisco Fed, we continue to listen to the needs of low-income communities and the organizations that serve them. Our Community Development outreach team knew that facing the pandemic would be especially difficult for low-income communities as the COVID-19 virus began to spread across the country.

“Throughout history we’ve seen that people already at a disadvantage are the most vulnerable during a disaster and its recovery. We see it with hurricanes and earthquakes. We see it with economic recessions. And we’re seeing the same patterns as the novel coronavirus pandemic places heavier burdens on low-income communities and communities of color,” explains senior researcher Bina Shrimali.

Banks play a critical role in supporting our collective economic resilience, and particularly during this current crisis. How did banks in the Western United States respond to the needs of low- and moderate-income (LMI) communities during the early days of the coronavirus pandemic? Were there any changes to lending, services, and investments? Did updated Community Reinvestment Act (CRA) guidance from regulators change the ways banks were operating? How were growing needs being prioritized? What were the responses to changing community conditions?

Our Community Development field team wanted to find answers to these questions. So, in mid-March, they began to call and email community development officers at financial institutions across the San Francisco Fed’s 12th District. The following themes emerged from these semi-structured interviews.

  • Banks and community-based organizations partnered to respond to immediate needs in their local areas.
  • Banks made operational changes to protect staff and customers.
  • Banks offered short-term relief to their clients.
  • Ideas are developing for new and responsive programs, especially to meet the needs of small businesses and nonprofits.
  • Banks are motivated to meet community needs and go beyond requirements of the Community Reinvestment Act (CRA).
  • The coronavirus crisis may offer banks an opportunity to imagine a new future and incubate new solutions to old problems.

Writing a new playbook

“A big message we heard is that this is a unique moment that requires its own playbook,” says Shrimali. “Given that resources are constrained, it is important that banks work creatively to leverage their resources not just for immediate needs but to enable a supportive long-term strategy as the crisis unfolds.”

For more detailed takeaways from this SF Fed outreach effort, please read our Community Development Research Brief.

In the coming weeks and months, Community Development will continue to follow banks to see how they build on these early actions.

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The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.