United States Government Accountability Office

GAO Report to Congressional Requesters

MINORITY BANKS October 2006 

Regulators Need to 

Better Assess 

Effectiveness of 

Support Efforts 

 

GAO-07-6 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

October 2006

MINORITY BANKS

Regulators Need to Better Assess 

Highlights of GAO-07-6, a report to Effectiveness of Support Efforts 

congressional requesters 

Minority banks can play an 

important role in serving the

financial needs of historically 

underserved communities and

growing populations of minorities.

For this reason, the Financial 

Institutions, Reform, Recovery, and

Enforcement Act of 1989 (FIRREA) 

established goals that the Federal

Deposit Insurance Corporation 

(FDIC) and the Office of Thrift 

Supervision (OTS) must work 

toward to preserve and promote 

such institutions (support efforts). 

To evaluate their efforts, as well as 

those of the Office of the 

Comptroller of the Currency (OCC) 

and the Federal Reserve, GAO (1) 

reviewed the profitability of 

minority banks, (2) identified the 

regulators’ support and assessment 

efforts, and (3) obtained the views 

of minority banks on the 

regulators’ efforts. 

GAO reviewed financial data from 

FDIC, interviewed regulators, and

surveyed all minority banks. 

What GAO Recommends

GAO recommends that the banking 

regulators review the effectiveness 

of their efforts by such means as

(1) regularly surveying minority 

banks and/or (2) establishing 

outcome-oriented performance 

measures. The regulators may wish

to focus on obtaining feedback

from small and African-American

banks. FDIC, OTS, and OCC agreed

to implement the recommendation, 

while the Federal Reserve will 

consider implementing it. 

The profitability of most large minority banks (assets greater than $100 

million) was nearly equal to that of their peers (similarly sized banks) in 2005

and earlier years. However, many small minority banks and AfricanAmerican banks of all sizes were less profitable than their peers. GAO’s 

analysis and other studies identified some possible explanations for these 

differences, including relatively higher loan loss reserves and operating 

expenses and competition from larger banks. 

Bank regulators have adopted differing approaches to supporting minority 

banks, but no agency has regularly and comprehensively assessed the 

effectiveness of its efforts. FDIC—which supervises over half of all minority 

banks—has the most comprehensive support efforts and leads interagency 

efforts. OTS focuses on providing technical assistance to minority banks. 

While not required to do so by Section 308 of FIRREA, OCC and the Federal 

Reserve have taken some steps to support minority banks and are planning 

others. Although FDIC has recently sought to assess the effectiveness of its 

support efforts through various methods, none of the regulators 

comprehensively surveys minority banks to obtain their views or has 

developed outcome-oriented performance measures. Consequently, the 

regulators are not well positioned to assess their support efforts. 

GAO’s survey of minority banks identified potential limitations in the 

regulators’ support efforts that would likely be of significance to agency

managers and warrant follow-up analysis. Only about one-third of survey 

respondents rated their regulators’ efforts for minority banks as very good or 

good, while 26 percent rated the efforts as fair, 13 percent as poor or very 

poor, and 25 percent responded “don’t know” (see fig.). Banks regulated by 

FDIC were more positive about their agency’s efforts than banks regulated 

by other agencies. However, only about half of the FDIC-regulated banks 

and about a quarter of the banks regulated by other agencies rated their 

agency’s efforts as very good or good. Although regulators may emphasize 

the provision of technical assistance to minority banks, less than 30 percent 

of such institutions have used such agency services within the last 3 years 

and therefore may be missing opportunities to address problems that limit 

their operations or financial performance. 

Minority Banks’ Ratings of Support Efforts, by Regulator 

Percentage

Source: GAO.

0

20

40

10

30

50

Total FDIC Federal Reserve OCC OTS

Don’t know F Poor/very poor air Very good/good

www.gao.gov/cgi-bin/getrpt?GAO-07-6.

To view the full product, including the scope 

and methodology, click on the link above. To view 

the results of GAO’s survey of minority banks, 

click www.gao.gov/cgi-bin/getrpt?GAO-07-7SP. 

For more information, contact George A. Scott at

202-512-7215 or scottg@gao.gov. 
Contents 

Letter 1

Results in Brief 4 

Background 7 

Larger Minority Banks Showed Profitability Close to That of Their 

Peers and Historical Benchmarks, but Many Small and AfricanAmerican Banks Have Been Less Profitable 11 

Regulators Adopted Differing Approaches to Supporting Minority 

Banks, but Assessment Efforts Were Limited 20 

Survey of Minority Banks Identified Potential Limitations in 

Regulators’ Support Efforts and Other Regulatory Issues 31 

Conclusions 39 

Recommendation for Executive Action 40 

Agency Comments and Our Evaluation 41 

Appendix I Objectives, Scope, and Methodology 45 

Appendix II Minority Bank Eligibility Criteria 51 

Appendix III Selected Survey Results 54 

Appendix IV Comments from the Federal Deposit Insurance 

Corporation 59 

Appendix V Comments from the Office of Thrift Supervision 61 

Appendix VI Comments from the Comptroller of the Currency 63 

Appendix VII Comments from the Board of Governors of the 

Federal Reserve System 65 

Page i GAO-07-6 Minority Banks 
Appendix VIII GAO Contact and Staff Acknowledgments 68

Tables 

Table 1: Number and Percentage of Minority Banks, by Type, 2005 7 

Table 2: Percentage of Minority Banks and Total Banking Industry, 

by Asset Size, 2005 8 

Table 3: Federal Bank Regulator Bank Supervisory 

Responsibilities, by Bank Charter 8 

Table 4: Number of Minority Banks, by Regulator, 2005/2006 9 

Figures 

Figure 1: Percentage of Minority Banks by Size and Average ROA 

for Minority Banks and Peer Groups by Asset Size, 2005 13 

Figure 2: Average ROA of Small Minority Banks, 2005 14 

Figure 3: Average ROA of African-American Banks and Peer Banks 

by Asset Size, 2005 15 

Figure 4: Average Loan Loss Reserves as a Percentage of Assets for 

African-American and Peer Banks, 2005 17 

Figure 5: Average Operating Expenses Relative to Earning Assets 

of Banks with Assets Less than $100 million, 2005 18 

Figure 6: Banking Regulators’ Efforts to Support Minority Banks 21 

Figure 7: Minority Banks’ Ratings of Support Efforts, by Regulator 33 

Figure 8: Usefulness of FDIC’s Roundtables and Conferences, by 

Regulator 34 

Figure 9: Minority Banks’ Use of Technical Assistance, by 

Regulator 36 

Figure 10: Minority Banks’ Evaluation of the Extent to Which CRA 

Has Encouraged Partnerships with Other Institutions 38 

Figure 11: Regulators’ Eligibility Criteria for Minority Bank Efforts 52 

Page ii GAO-07-6 Minority Banks 
Abbreviations 

CRA Community Reinvestment Act 

FDIC Federal Deposit Insurance Corporation 

FIRREA Financial Institutions, Reform, Recovery, and Enforcement 

 Act 

MBDP Minority Bank Deposit Program 

MBR Minority Bankers Roundtable 

NBA National Bankers Association 

OCC Office of the Comptroller of the Currency 

OTS Office of Thrift Supervision 

ROA return on assets 

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Page iii GAO-07-6 Minority Banks 
United States Government Accountability Office

Washington, DC 20548 

October 4, 2006 

Congressional Requesters 

Minority banks are a small community within the banking industry, 

accounting for about 2 percent of all financial institutions and total 

industry assets.1

 Despite their small numbers, minority banks can play an 

important role in serving the financial needs of historically underserved 

communities, such as African-Americans, and growing populations of 

minorities, such as Hispanic-Americans and Asian-Americans. For this 

reason, Section 308 of the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989 (FIRREA) established goals that federal 

regulators must work toward to preserve and promote such institutions.2

For example, the Federal Deposit Insurance Corporation (FDIC) and the 

Office of Thrift Supervision (OTS), in consultation with the Department of 

the Treasury (Treasury), are required to provide minority banks with 

technical assistance and training and educational programs and to work 

toward preserving the character of minority banks in cases involving 

 

1

For purposes of this report, the term “minority banks” refers to all depository 

institutions—including thrifts—that are considered minority- or women-owned by the 

Department of the Treasury (Treasury) and the federal banking regulators—the Federal 

Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve 

System (Federal Reserve), the Office of the Comptroller of the Currency (OCC), and the 

Office of Thrift Supervision (OTS). As discussed in appendix II, FDIC and OTS are subject 

to the “minority depository institution definition” set forth in Section 308 of the Financial 

Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Treasury uses 

different criteria as set forth for eligibility in its Minority Bank Deposit Program (MBDP). 

OCC and the Federal Reserve employ Treasury’s criteria for minority- and women-owned 

banks (although the Federal Reserve uses both the FIRREA definition and Treasury’s for 

different purposes). Treasury and each of the banking regulators compile lists of 

institutions that they consider to be eligible to participate in their minority banking efforts. 

As Section 308 of FIRREA is not aimed at preserving and promoting the minority 

ownership status of credit unions, we did not include the National Credit Union 

Administration in our review. 

2

FIRREA, Pub. L. No. 101-73, § 308, 103 Stat. 183, 353 (1989). 

Page 1 GAO-07-6 Minority Banks 
mergers or acquisitions of these institutions (we refer to these activities as 

efforts to support minority banks in our report).3

In 1993, we reported on efforts by Treasury, FDIC, and OTS to support 

minority banks in accordance with Section 308 of FIRREA.4

 At that time, 

we found that these agencies had taken steps to respond to Section 308, 

but minority banks we interviewed gave FDIC and OTS mixed reviews on 

their efforts. In particular, minority banks were concerned that the 

regulators did not provide adequate technical assistance. Further, minority 

banks expressed concerns about related regulatory issues, including their 

view that agency safety and soundness examiners did not fully understand 

the unique challenges their institutions faced.5

 We recommended that 

FDIC and OTS periodically survey minority banks to assess the 

effectiveness of their efforts to support such institutions. 

You requested that we follow up on our 1993 report and review all of the 

federal banking regulators’ efforts to support minority banks, including the 

activities of the Office of the Comptroller of the Currency (OCC) and the 

Board of Governors of the Federal Reserve System (Federal Reserve), 

which are not subject to Section 308 of FIRREA.6

 Accordingly, our 

reporting objectives were to (1) review the profitability of minority banks 

over time, (2) identify the federal banking regulators’ efforts to support 

minority banks and determine whether the regulators were evaluating the 

effectiveness of these efforts, and (3) obtain the views of minority banks 

on the federal regulators’ minority banking support efforts and related 

regulatory issues. 

 

3

“Technical assistance” is typically defined as one-on-one assistance that a regulator may 

provide to a bank. For example, a regulator may advise a bank on compliance with a 

particular statute or regulation. Regulators may also provide technical assistance to banks 

that is related to deficiencies identified in safety and soundness or compliance 

examinations. In contrast, education programs are typically open to all banks regulated by 

a particular agency or to all banks located within a regulator’s regional office. For example, 

regulators may offer training for banks to review compliance with laws and regulations. 

4

GAO, Minority-Owned Financial Institutions: Status of Federal Efforts to Preserve 

Minority Ownership, GAO/GGD-94-1 (Washington, D.C.: Nov. 3, 1993). 

5

Federal banking regulators conduct periodic examinations of banks to assess their 

financial condition and compliance with laws and regulations, among other activities. 

6

Unless otherwise specified, we use the term “Federal Reserve” throughout this report to 

refer to the Federal Reserve System. The Federal Reserve System includes the Federal 

Reserve’s Board of Governors and the 12 Federal Reserve Banks. 

Page 2 GAO-07-6 Minority Banks 
To address the first objective, we obtained and analyzed financial data for 

minority banks from FDIC for 2005, 2000, and 1995.7

 We also reviewed 

background literature and conducted interviews with minority banks to 

discuss the business environment in which these banks operate. For the 

second objective, we interviewed officials from the Department of the 

Treasury, FDIC, Federal Reserve, OCC, and OTS and reviewed regulators’ 

documentation addressing their efforts to support minority banks and 

assess the effectiveness of these efforts. We also compared the regulators’ 

efforts to our standards for program assessment and performance 

measures and those established in the Government Performance and 

Results Act. To address the third objective, we conducted a Web-based 

survey of all institutions identified by the banking regulators as minority 

institutions. The survey, which was conducted from March through April 

2006, asked about the banks’ awareness and use of the regulators’ minority 

bank support efforts and also asked the banks to rate these efforts. We 

received 149 survey responses out of a total population of 195 minority 

banks, for a response rate of 76 percent. We also interviewed relevant 

trade associations and a sample of 19 minority banks throughout the 

United States that we selected based on type of minority ownership and 

primary regulator. Appendix I explains our scope and methodology in 

greater detail. Appendix II describes each regulator’s definition of 

minority-owned and women-owned banks for purposes of eligibility for 

participation in the regulator’s particular minority banking support efforts. 

Appendix III provides the number of minority banks that responded to 

each survey question discussed in the report and thereby supplements the 

use of percentages to summarize these results. All survey questions and 

the frequencies of responses to each question are presented in a 

supplemental product that can be found on our Web site at 

www.gao.gov/cgi-bin/getrpt?GAO-07-7SP. 

We conducted our work in Washington, D.C., and New York from 

December 2005 to September 2006 in accordance with generally accepted 

government auditing standards. 

 

7

Because information on minority banks was not available for both 2000 and 1995 from all 

federal banking regulators, for these periods we analyzed only those minority banks that 

were still operating as minority institutions in 2005. As a result, minority banks that failed 

or merged with other institutions between 1995 and 2005 are not included in the analysis 

for those years. In addition, we were unable to confirm that all 2005 minority banks were 

operating as minority banks in 1995 and 2000, although the rate of change in ownership 

among minority banks is low. 

Page 3 GAO-07-6 Minority Banks 
Our analysis of FDIC data showed that while the profitability of most 

minority banks with assets greater than $100 million nearly equaled the 

profitability of all similarly sized banks (peers), the profitability of smaller 

minority banks and African-American banks of all sizes did not.8

Profitability is commonly measured by return on assets (ROA), or the ratio 

of profits to assets, and ROAs are typically compared across peer groups 

to assess performance.9

 Many small minority banks (those with less than 

$100 million in assets) had ROAs that were substantially lower than those 

of their peer groups in 2005 as well as in 1995 and 2000. Moreover, AfricanAmerican banks of all sizes had ROAs that were significantly below those 

of their peers in 2005 as well as in 1995 and 2000 (African-American banks 

of all sizes and other small minority banks account for about half of all 

minority banks). Our analysis of FDIC data identified some possible 

explanations for the relatively low profitability of some small minority 

banks and African-American banks. In particular, some of these banks 

maintain relatively high reserves for potential loan losses or may have 

higher operating expenses, such as administrative expenses or salaries, 

than other banks. The results of other studies we reviewed were 

consistent with these findings, and minority banks that we spoke with 

offered additional explanations, such as the effects of increased 

competition from larger banks. Nevertheless, the majority of officials from 

banks across all minority groups were positive about their banks’ financial 

outlook, and many saw their minority status as an advantage in serving 

their communities (for example, in providing services in the language 

predominantly used by the minority community). 

Results in Brief 

The bank regulators have adopted differing approaches to supporting 

minority banks, and no agency assessed the results of its efforts through 

regular and comprehensive surveys of minority banks or outcome-oriented 

performance measures.10 FDIC—which supervises more than half of all 

minority banks—currently has the most comprehensive program to 

support minority banks and leads an interagency group that coordinates 

such efforts. Among other things, FDIC has designated officials in the 

agency’s headquarters and regional offices who are responsible for 

minority bank efforts, holds periodic conferences for minority banks, and 

 

8

Peer groups include all institutions of a similar asset size, including minority and 

nonminority institutions. Peer groups were defined by FDIC. 

9

Examples of assets include loans and securities. 

10Outcome-oriented performance measures assess the results of a program against its 

intended purposes. 

Page 4 GAO-07-6 Minority Banks 
has established formal policies for annual outreach to the banks it 

regulates to make them aware of available technical assistance. OTS also 

has staff who are responsible for the agency’s efforts to support minority 

banks, has developed outreach procedures, and focuses its efforts on 

providing technical assistance. OCC and the Federal Reserve, while not 

required to do so by Section 308 of FIRREA, have undertaken some efforts 

to support minority banks, such as holding occasional conferences for 

Native American banks, and are planning additional efforts. FDIC has 

proactively sought to assess the effectiveness of its support efforts 

through, for example, surveying minority banks. However, these surveys 

have not addressed key activities, such as the provision of technical 

assistance, and the agency has not established outcome-oriented 

performance measures for its support efforts. None of the other regulators 

comprehensively surveys minority banks on their support efforts or has 

established outcome-oriented performance measures. Consequently, the 

regulators are not well positioned to assess the results of their minority 

bank support efforts or identify potential areas for improvement. 

In our survey, minority banks identified potential limitations in the 

regulators’ support efforts and related regulatory issues that would likely 

be of significance to agency managers and may warrant follow-up analysis. 

Specifically, our survey showed that (1) only about one-third of minority 

banks view the regulators’ support efforts as very good or good; (2) 

minority banks’ usage of the agencies’ technical assistance appears to be 

low; and (3) some minority banks have concerns about related regulatory 

activities, such as examiners’ knowledge of issues that affect their 

institutions. About 36 percent of survey respondents rated their regulators’ 

efforts for minority banks as very good or good, while 26 percent rated the 

efforts as fair, 13 percent as poor or very poor, and 25 percent responded 

“don’t know.” Banks regulated by FDIC, which had the most extensive 

program and outreach efforts, were more positive about their agency’s 

efforts than banks regulated by other agencies. However, only about half 

of the FDIC-regulated banks and about a quarter of the banks regulated by 

other agencies rated their agency’s efforts as very good or good. While 

FDIC and OTS both emphasize the provision of technical assistance as 

part of their minority bank efforts, our survey showed that less than 30 

percent of institutions regulated by these agencies took advantage of such 

assistance within the last 3 years. The majority of those banks that used 

technical assistance, however, found it to be useful. Minority banks 

regulated by OCC and the Federal Reserve reported similarly low usage of 

the agencies’ technical assistance services. While it is not clear from our 

survey why relatively few minority banks use the agencies’ technical 

assistance services and regulators cannot compel banks to use such 

Page 5 GAO-07-6 Minority Banks 
assistance, the potential exists for many such institutions, particularly 

small and African-American banks, to benefit from assistance that might 

help improve their operations and financial performance. As with our 

findings in our 1993 report, some minority bank officials said that 

examiners do not always understand the challenges that the banks may 

face in providing services in their communities or operating 

environments.11 Although the bank officials said they did not expect 

special treatment in the examination process, they suggested that 

examiners needed to undergo more training to improve their 

understanding of minority banks and the customer base they serve. 

This report makes a recommendation designed to help ensure that the 

bank regulators are better able to understand the reasons behind potential 

limitations in their support efforts and related activities—particularly the 

limited use of technical assistance and concerns about examiners’ 

knowledge of minority bank issues—within the minority bank community 

and to take corrective actions as necessary. Specifically, the report 

recommends that the federal banking regulators review the effectiveness 

of their efforts to support minority banks and, in so doing, consider 

employing the following methods: (1) regularly surveying the minority 

banks under their supervision on all efforts and regulatory areas affecting 

these institutions and/or (2) establishing outcome-oriented performance 

measures to evaluate the extent to which their efforts are achieving their 

objectives. Regulators may also wish to focus their efforts on obtaining 

feedback from small minority banks and African-American banks in order 

to identify and address, if possible, any issues that may be causing the 

relatively low profitability of some of these institutions. 

We provided a draft of this report to FDIC, OTS, OCC, and the Federal 

Reserve for comment, and they provided written comments that are 

reprinted in appendixes IV–VII. In their responses, the agencies further 

elaborated on their existing minority bank efforts and described planned 

initiatives. Further, FDIC, OTS, and OCC agreed to implement our 

recommendation, while the Federal Reserve said it would consider 

implementing it. The agencies also provided technical comments, which 

were incorporated as appropriate. We also requested comments from the 

Department of the Treasury on the section of the draft report relevant to 

 

11When asked for suggestions about how regulators could improve their efforts to support 

minority banks, 21 percent of survey responses mentioned this issue. In addition, several 

minority banks we spoke with in interviews voiced similar opinions. 

Page 6 GAO-07-6 Minority Banks 
its activities under Section 308 of FIRREA. Treasury provided us with 

technical comments, which we have incorporated as appropriate. 

Many minority banks are located in urban areas and seek to serve 

distressed communities and populations that have traditionally been 

undeserved by financial institutions. For example, after the Civil War 

banks were established to provide financial services to African-Americans. 

More recently, Asian-American and Hispanic-American banks have been 

established to serve the rapidly growing Asian and Hispanic communities 

in the United States. In our review of regulators’ lists of minority banks, 

we identified a total minority bank population of 195 for 2005 (table 1). 

Background 

Table 1: Number and Percentage of Minority Banks, by Type, 2005 

Type of minority bank Number of banks Percentage of all minority banks

Asian-Americana73 37

African-American 46 24

Hispanic-American 38 19

Native American 20 10

Women-owned 13 7

Otherb5 3

Total 195 100

Source: GAO analysis of Treasury and federal banking regulators’ data. 

Note: We identified the total minority bank population by obtaining and reviewing the most current 

lists (available at the time the population was compiled) from the federal banking regulators and 

Treasury. We reviewed FDIC and the Federal Reserve’s publicly available lists, which were current 

as of September 30, 2005. We also reviewed OCC’s list from December 31, 2005, Treasury’s most 

recent list from 2004, and OTS’s from January 2006. 

a

Asian-American includes individuals of Pacific Island descent. 

b

The “other” category includes banks considered to have minority status that are not covered by the 

listed minority categories. “Other” also includes banks that are owned or managed by more than one 

minority group in accordance with a banking regulator’s definition. 

Table 2 shows that the distribution of minority banks by size is similar to 

the distribution of all banks by size. More than 40 percent of all minority 

banks had assets of less than $100 million. 

Page 7 GAO-07-6 Minority Banks 
Table 2: Percentage of Minority Banks and Total Banking Industry, by Asset Size, 

2005 

Asset size 

Percentage of minority 

banks 

Percentage of total 

banking industry

< $100 million 42 44

$100 million to $300 million 32 33

$300 million to $500 million 9 9

$500 million to $1 billion 7 7

$1 billion to $10 billion 7 6

> $10 billion 3 1

Total 100 100

Source: GAO analysis of FDIC data. 

Each federally insured depository institution, including each minority 

bank, has a primary federal regulator: FDIC, OTS, OCC, or the Federal 

Reserve. The primary regulator for each bank is determined by the 

institution’s charter (table 3).12

Table 3: Federal Bank Regulator Bank Supervisory Responsibilities, by Bank 

Charter 

Regulator Type of bank 

FDIC State-chartered banks that are not members of the Federal Reserve 

System 

OTS Federally chartered and state-chartered savings associations and 

registered savings and loan holding companies 

OCC Nationally chartered banks and federal branches of foreign banks 

Federal Reserve State-chartered banks in the Federal Reserve System, bank holding 

companies, and international banking facilities within the United 

States 

Source: FDIC, OTS, OCC, and the Federal Reserve. 

 

12Throughout the report, we refer to thrifts as banks. 

Page 8 GAO-07-6 Minority Banks 
As shown in table 4, FDIC serves as the federal regulator for over half of 

minority banks—109 out of 195 banks, or 56 percent—and the Federal 

Reserve regulates the fewest.13

Table 4: Number of Minority Banks, by Regulator, 2005/2006 

Regulator Number of minority banks Percentage

FDIC 109 56

OCC 43 22

OTS 22 11

Federal Reserve 21 11

Total 195 100

Source: GAO analysis of Treasury and the federal banking regulators’ data. 

Note: Treasury and the banking regulators have different criteria for the banks they consider to be 

eligible to participate in their minority bank efforts (see app. II). In accordance with our request, in our 

population of minority banks we included any bank considered by at least one regulator to be eligible 

to participate in its efforts. There are cases where minority banks not considered by their primary 

regulator to be minority institutions were considered to be eligible for participation in another 

regulator’s efforts. Ten minority banks regulated by FDIC were such cases, as were 4 Federal 

Reserve banks, 1 OTS bank, and 3 OCC banks. 

The primary responsibilities of federal banking regulators include helping 

to ensure the safe and sound practices and operations of the institutions 

they oversee, the stability of financial markets, and compliance with laws 

and regulations. To achieve these goals, among other activities, the 

regulators conduct on-site examinations, issue regulations, conduct 

investigations, and take enforcement actions. Regulators may also close 

banks that are deemed to be insolvent and pose risks to the Deposit 

 

13In our 1993 report, we reported that FDIC supervised 52 minority banks and OTS 

supervised 41 minority banks as of March 1993. OCC officials told us that their agency 

regulated 42 minority banks in 1993, and the Federal Reserve reported that it regulated 16 

in 1993. 

Page 9 GAO-07-6 Minority Banks 
Insurance Fund.14 FDIC is responsible for ensuring that deposits in failed 

banks are protected up to established federal deposit insurance limits.15

Banking regulators primarily focus on ensuring the safety and soundness 

of banks, but laws and regulatory policies can identify additional goals and 

objectives. Recognizing the importance of minority banks, under Section 

308 of FIRREA, Congress outlined five broad goals that FDIC and OTS, in 

consultation with Treasury, are to work toward to preserve and promote 

minority banks. These goals are 

• preserving the present number of minority banks; 

• preserving their minority character in cases involving mergers or 

acquisitions of minority banks; 

• providing technical assistance to prevent the insolvency of institutions 

that are not currently insolvent; 

• promoting and encouraging the creation of new minority banks; and 

• providing for training, technical assistance, and educational programs. 

Technical assistance is typically defined as one-on-one assistance that a 

regulator may provide to a bank in response to a request. For example, a 

regulator may advise a bank on compliance with a particular statute or 

regulation. Regulators may also provide technical assistance to banks that 

is related to deficiencies identified in safety and soundness or compliance 

examinations. In contrast, educational programs are typically open to all 

banks regulated by a particular agency or to all banks located within a 

 

14The Deposit Insurance Fund is the fund that provides deposit insurance for banks and 

thrifts and is administered by FDIC. 

15For most of FDIC’s history, purchase and assumption agreements—during which a 

healthy bank purchases some or all of the assets of a failed bank, as well as some or all of 

its liabilities—have been the preferred resolution method for troubled and failed banks. 

Under this method, FDIC values and markets the institutions and closes the institutions. 

The other two resolution methods FDIC has employed are (1) a deposit payoff, in which 

FDIC is the appointed receiver and all depositors with insured funds are paid the full 

amount of their deposits (depositors with uninsured funds and other general creditors of 

the failed bank are given receivership, entitling them to a share of the net proceeds from 

the sale of the bank’s assets); and (2) an open bank assistance agreement under which 

FDIC provides financial assistance to an operating insured bank that is in danger of closing 

by making loans to the bank, purchasing assets, or placing deposits in the troubled bank. 

Page 10 GAO-07-6 Minority Banks 
regulator’s regional office. For example, regulators may offer training for 

banks to review compliance with laws and regulations. 

Larger Minority Banks 

Showed Profitability 

Close to That of Their 

Peers and Historical 

Benchmarks, but 

Many Small and 

African-American 

Banks Have Been 

Less Profitable 

Most minority banks with assets exceeding $100 million were nearly as 

profitable—measured by ROA—as their peers in 2005 as well as in earlier 

years, or had levels of profitability that have historically been considered 

adequate, according to our analysis of FDIC data. However, small minority 

and African-American banks of all sizes (which together account for about 

half of all minority institutions) have been significantly less profitable than 

their industry peers. Our analysis and other research has suggested some 

possible reasons for lower profitability among some small minority banks 

and African-American banks, such as higher reserves for potential loan 

losses and higher operating expenses. The results of other studies we 

reviewed were consistent with these findings, and minority banks that we 

spoke with offered additional explanations, such as the effects of 

increased competition from larger banks. However, overall officials from 

banks across all minority groups were positive about the financial outlook 

of their institutions. Many found their minority status to be an advantage 

in serving their communities—for example, in communicating with 

customers in their primary languages. 

As shown in figure 1, most minority banks with assets exceeding $100 

million had ROAs in 2005 that were close to those of their peer groups, 

while many smaller banks had ROAs that were significantly lower than 

that of their peers.16 Minority banks with more than $100 million in assets 

accounted for 58 percent of all minority banks, while those with less than 

$100 million accounted for 42 percent.17 Each size category of minority 

banks with more than $100 million in assets had a weighted average ROA 

that was slightly lower than that of its peers, but in each case their ROAs 

exceeded 1 percent.18 By historical banking industry standards, an ROA of 

1 percent or more has generally been considered an adequate level of 

Small and AfricanAmerican Banks’ 

Profitability Was Lower 

than That of Peers 

 

16Some minority banks were established relatively recently (between 2002 and 2006). 

Although newer banks tend to be less profitable than older banks, we found that, in 2005, 

generally both older and newer small banks had significantly lower ROAs than their peers. 

17The banking industry as a whole has an asset size distribution similar to that of minority 

banks (table 2). 

18A weighted average is a variation on a simple average. Weighted averages take into 

account banks’ asset size instead of counting each bank as an equal unit. 

Page 11 GAO-07-6 Minority Banks 
profitability. We found that of these larger minority banks, HispanicAmerican, Asian-American, Native American, and women-owned banks 

were close to, and in some cases exceeded, the profitability of their peers 

in 2005. 

Overall, small minority banks (those with assets of less than $100 million) 

had an average ROA of 0.4 percent, and their peers had an average ROA of 

1 percent. Our analysis of FDIC data for 1995 and 2000 also indicated some 

similar patterns, with minority banks with assets greater than $100 million 

showing levels of profitability that were generally close to those of their 

peers, or ROAs of about 1 percent, while minority banks with assets of less 

than $100 million showed greater differences with their peers. Further, in 

2000 the Chairman of FDIC discussed the agency’s finding that many small 

minority banks lagged in profitability. According to FDIC’s analysis, nearly 

70 percent of small minority banks reported an ROA in 1999 of under 1 

percent, and nearly 40 percent reported an ROA of less than half the 

industry average.19

 

19Donna Tanoue, “Remarks By Donna Tanoue, Chairman Federal Deposit Insurance 

Corporation before The National Bankers Association, Chicago, Illinois October 4, 2000,” 

FDIC. Available at http://www.fdic.gov/news/news/speeches/archives/2000/sp04Oct00.html. 

Page 12 GAO-07-6 Minority Banks 
Figure 1: Percentage of Minority Banks by Size and Average ROA for Minority Banks and Peer Groups by Asset Size, 2005 

0

0.3

0.6

0.9

1.2

1.5

Asset sizes

Minority banks by asset size ROA

42%

32%

9%

7%

7%

3%

Source: GAO.

Minority banks less than $100 million

Minority banks $100 million-$300 million

Minority banks $300 million-$500 million

Minority banks $500 million-$1 billion

Minority banks $1 billion-$10 billion

Minority banks greater than $10 billion

Peer group 

ROA

Among small minority banks, African-American, Asian-American, and 

Hispanic-American banks had ROAs that were significantly lower than 

those of their peers, while the ROAs of small Native American and womenowned banks were closer to those of their peers (fig. 2). For example, the 

ROA for small Asian-American banks in 2005 was 0.10 percent and 

Hispanic-American banks’ ROA was 0.65 percent, compared with their 

peers’ ROA of 1 percent. Our analysis of FDIC data for 1995 and 2000 

showed similar results, with small African-American, Asian-American, and 

Page 13 GAO-07-6 Minority Banks 
Hispanic-American banks in particular having significantly lower ROAs 

than their peers.20

Figure 2: Average ROA of Small Minority Banks, 2005 

0

0.2

0.4

0.6

0.8

1.0

Women

Native

American

HispanicAmerican

AsianAmerican

AfricanAmerican

ROA

Source: GAO analysis of FDIC data.

Minority banks

Peer g

Total

roup

minority

banks

The profitability of African-American banks has generally been below that 

of their peers in all size categories (fig. 3).21 African-American banks with 

less than $100 million in assets—which constitute 61 percent of all 

 

20The findings from our analysis of ROAs were consistent with our analysis of another 

measure of profitability—return on equity (ROE). ROE represents the bank’s net income 

divided by shareholders’ equity. As with ROA comparisons, small minority banks had on 

average lower ROEs than their peers (3.83 versus 8.09). And consistent with our ROA 

analysis, among small minority banks, African-American (ROE of 1.54), Asian-American 

(0.72), and Hispanic-American banks (6.11) had lower ROEs than Native American (8.69) 

and women-owned institutions (8.39). Further, African-American banks with assets of 

between $100 million and $300 million had ROEs that were significantly lower, on average 

(3.45), than those of their peers (11.03). 

21In 2005, African-American banks did not occupy all asset size categories. The largest 

African-American banks had less than $1 billion in assets, and these banks were not found 

in the largest size categories: $1 billion to $10 billion and greater than $10 billion. 

Page 14 GAO-07-6 Minority Banks 
African-American banks—had an average ROA of 0.16 percent, while their 

peers averaged 1.0 percent. Similarly, African-American banks with assets 

of between $100 million and $300 million—which constituted 26 percent of 

all African-American banks—had ROAs that were 75 percent lower than 

those of their peers. While profitability improved among larger categories, 

the profitability of African-American banks with assets of $300 million or 

more was lower than that of their peers. Our analysis of FDIC data for 

2000 and 1995 also found that African-American banks of all sizes had 

lower ROAs than their peers. For example, in 2000 African-American 

banks with assets of between $100 million and $300 million had an average 

ROA that was about half of their peers’ average of 1.2 percent. 

Figure 3: Average ROA of African-American Banks and Peer Banks by Asset Size, 

2005 

ROA

Source: GAO analysis of FDIC data.

African-American banks

Peer group 

Dollars in millions

0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Less than $100 $100-$300 $300-$500 $500-$1,000

Page 15 GAO-07-6 Minority Banks 
Our analysis of 2005 FDIC data suggests some possible reasons for the 

differences in profitability between some minority banks and their peers.22

For example, our analysis of 2005 FDIC data showed that AfricanAmerican banks with assets of less than $300 million—which constitute 87 

percent of all African-American banks—had significantly higher loan loss 

reserves as a percentage of their total assets than the average for their 

peers (fig. 4).23 Although having higher loan loss reserves may be 

necessary for the safe and sound operation of any particular bank, 

because loan loss reserves are counted as expenses, higher reserves lower 

bank profits. Most Asian-American, Hispanic-American, Native American, 

and women-owned banks had loan loss reserves that were closer to the 

average for their peer group in 2005. 

Higher Loan Loss 

Reserves, Operating Costs, 

and Increased Competition 

May Help Explain Lower 

Profitability of Certain 

Minority Banks 

 

22While our review offers possible explanations for lower levels of profitability among some 

minority banks, it does not attempt to fully explain the differences among various minority 

groups or sizes of minority banks. 

23The term “loan loss reserves” refers to the allowance each bank must maintain to absorb 

estimated credit losses associated with its loan and lease portfolio. 

Page 16 GAO-07-6 Minority Banks 
Figure 4: Average Loan Loss Reserves as a Percentage of Assets for AfricanAmerican and Peer Banks, 2005 

Percentage

Source: GAO analysis of FDIC data.

African-American banks

Peers

Dollars in millions

Less than $100 $100-$300

0

10

20

30

40

50

60

70

80

90

100

We also found some evidence that higher operating expenses may affect 

the profitability of some minority banks. Operating expenses—

expenditures for items such as administrative expenses and salaries—are 

typically compared to an institution’s total earning assets, such as loans 

and investments, to indicate the proportion of earning assets banks spend 

on operating expenses. As figure 5 indicates, many minority banks with 

less than $100 million in assets had higher operating expenses than their 

peers in 2005. Specifically, the average ratio of minority banks’ operating 

expenses to earning assets was 4.88 percent, compared with an average 

3.86 percent for the peer group, or a difference of 21 percent. 

Page 17 GAO-07-6 Minority Banks 
Figure 5: Average Operating Expenses Relative to Earning Assets of Banks with 

Assets Less than $100 million, 2005 

Women

Native

American

HispanicAmerican

AsianAmerican

AfricanAmerican

Percentage

Source: GAO analysis of FDIC data.

Minority banks

0

1

2

3

4

5

6

Peer g

Total

roup

minority

banks

Small African-American and Asian-American banks had higher operating 

expenses than their peers (41 and 20 percent higher, respectively), while 

operating expenses for small Hispanic-American banks were closer to 

their peers (7 percent higher). Data on the operating expenses of small 

women-owned banks were lower than their peers, while Native American 

banks had higher operating expenses, although, as we have seen, both 

Native American and women-owed banks were the most profitable of 

small minority banks. Because larger African-American banks were 

relatively less profitable than their peers, we also reviewed FDIC data on 

their operating expenses in 2005. The FDIC data indicate that AfricanAmerican banks with assets of between $100 million and $500 million had 

operating expense ratios that exceeded those of their respective peer 

groups by 20 percent or more. Other studies corroborated our findings 

Page 18 GAO-07-6 Minority Banks 
that some minority banks operate in more challenging markets and may 

face higher operating costs.24

Officials from several minority banks we contacted also described aspects 

of their operating environments and business practices, including a focus 

on customer service that could result in higher operating costs. In 

particular, the officials cited the costs associated with providing banking 

services in low-income urban areas or in communities with high immigrant 

populations. Bank officials also told us that they focus on fostering strong 

customer relationships, sometimes providing financial literacy services. 

Consequently, these banks spend more time and resources on their 

customers per transaction than other banks as part of their mission. Other 

minority bank officials said that their customers made relatively small 

deposits and preferred to do business in person at bank branch locations 

rather than through potentially lower-cost alternatives, such as over the 

phone or the Internet. 

Along with these factors, minority bank officials we contacted cited other 

factors that could limit their profitability. First, many minority banks 

indicated competition from larger banks, credit unions, and nonbanks as 

their institution’s greatest challenge. In particular, minority bank officials 

said that larger banks, in response to Community Reinvestment Act (CRA) 

incentives, were increasingly posing competitive challenges among the 

banks’ traditional customer base.25 The bank officials said that larger 

banks could offer loans and other financial products at more competitive 

prices because these banks could raise funds at lower rates and had 

advantageous operational efficiencies. Second, some African-American, 

Asian-American, and Hispanic-American banks cited attracting and 

retaining quality staff as a challenge to profitability. Officials from one 

Hispanic-American bank said that the difficulty of attracting qualified new 

staff restricted the bank’s growth. An Asian-American banker said that 

 

24Zahid Iqbal, Kizhanathan V. Ramaswamy, and Aigbe Akhigbe, “The Output Efficiency of 

Minority-Owned Banks in the United States,” International Review of Economics and 

Finance, vol. 8 (1999) p. 113; Iftekhar Hasan and William C. Hunter, “Management 

Efficiency in Minority- and Women-owned banks,” Economic Perspectives, vol. 20 (1996). 

Edward C. Lawrence, “The Viability of Minority-Owned Banks,” The Quarterly Review of 

Economics and Finance, vol. 37, no. 1 (1997). 

25Section 807 of the Community Reinvestment Act of 1977 requires the federal banking 

regulators in connection with their examination of each institution they supervise to assess 

the institution’s record of meeting the credit needs of the entire community it serves, 

including moderate- and low-income neighborhoods. Pub. L. No. 95-128, § 807, 91 Stat. 1147 

(codified as amended at 12 U.S.C. § 2906). 

Page 19 GAO-07-6 Minority Banks 
many Asian-American banks tended to focus on the Asian-American 

market, potentially limiting the pool of qualified applicants. 

Despite these challenges, officials from banks across minority groups were 

optimistic about the financial outlook for their institutions. When asked in 

our survey to rate their financial outlook compared to those of the past 3 

to 5 years, 65 percent said it would be much or slightly better; 21 percent 

thought it would be about the same, and 11 percent thought it would be 

slightly or much worse, while 3 percent did not know. Officials from 

minority banks said that their institutions had advantages in serving 

minority communities. For example, officials from an Asian-American 

bank said that the staff’s ability to communicate in customers’ primary 

language provided a competitive advantage. 

Regulators Adopted 

Differing Approaches 

to Supporting 

Minority Banks, but 

Assessment Efforts 

Were Limited 

FDIC has established the most comprehensive efforts among the bank 

regulators to support minority banks and also leads interagency efforts to 

coordinate agencies’ activities. OTS also has developed several specific 

initiatives to support minority banks. While not required to do so by 

Section 308 of FIRREA, OCC and the Federal Reserve have taken some 

steps to support minority banks, such as holding occasional conferences 

for Native American banks, and are planning additional efforts. Treasury, 

which FIRREA stipulates is to consult with FDIC and OTS on preserving 

minority banks, no longer does so on a routine basis, but Treasury officials 

told us that the agency does confer with the banking agencies on an asneeded basis. Although recently FDIC has proactively sought to assess the 

effectiveness of its efforts to support minority banks, none of the 

regulators routinely survey institutions they regulate to obtain 

comprehensive performance information on their minority bank efforts, 

nor have they established outcome-oriented performance measures to 

gauge results in relation to pre-established targets. As a result, the 

regulators are not well positioned to assess the results of their efforts to 

support minority banks or identify potential areas for improvement. 

Of the four banking regulators, FDIC—which supervises 109 of 195 

minority banks—has developed the most extensive efforts to support such 

institutions (fig. 6). FDIC also has taken the lead in coordinating 

regulators’ efforts in support of minority banks, including leading a group 

of all the banking regulators that meets semiannually to discuss individual 

agency initiatives, training and outreach events, and each agency’s list of 

minority banks. FDIC and OTS have established national and regional 

coordinators to implement their policies to support minority banks and 

FDIC Has the Most 

Comprehensive Minority 

Banking Support Efforts 

Page 20 GAO-07-6 Minority Banks 
provide routine technical and other outreach procedures for the 

institutions that they regulate. OCC officials we contacted said that they 

believed that minority banks could play an important role in providing 

financial services to minorities and other groups, and Federal Reserve 

officials told us that they adhered to the spirit of Section 308 of FIRREA. 

While neither agency has developed support efforts designed specifically 

for all the minority institutions that they regulate, both agencies provide 

technical assistance and educational services to minority banks upon 

request, as they do for all of their supervised banks, and have undertaken 

efforts in support of some types of minority banks. Both agencies also told 

us that they were planning additional efforts to support minority 

institutions. 

Figure 6: Banking Regulators’ Efforts to Support Minority Banks 

Policy statement 

Staffing structure

OTS Federal

Reserve (not under

Section 308)

FDIC OCC

(not under

Section 308)

Source: GAO. 

Technical assistance and 

other outreach procedures

Holds events for minority banksa

Written policy for

troubled/failing minority banks

Web page with resources

for minority banks

a

FDIC holds conferences for all minority banks on a regular basis. OTS, OCC, and the Federal 

Reserve have hosted occasional events for some groups of minority banks. 

The following briefly describes the regulators’ minority bank support 

programs, as listed in figure 6. 

FDIC, OTS, and OCC all have policy statements that outline the agencies’ 

efforts with respect to minority banks. The policy statements discuss how 

the regulators identify minority banks, participate in minority bank events, 

provide technical assistance, and work toward preserving the character of 

minority banks during the resolution process. OCC officials told us that 

Policy Statements 

Page 21 GAO-07-6 Minority Banks 
they developed their policy statement in 2001 after an interagency meeting 

of the federal banking regulators on minority bank issues. Both FDIC and 

OTS issued policy statements in 2002. 

FDIC has a national coordinator in Washington, D.C., and coordinators in 

each regional office from its Division of Supervision and Consumer 

Protection to implement the agency’s minority bank program. Among 

other responsibilities, the national coordinator regularly contacts minority 

bank trade associations about participation in events and other issues, 

coordinates with other agencies, maintains FDIC’s list of all insured banks 

that are considered to be minority under the agency’s definition, and 

compiles quarterly reports for the FDIC chairman based on regional 

coordinators’ reports on their minority bank activities. Similarly, OTS has 

a national coordinator in its headquarters and supervisory and community 

affairs staff in each region who maintain contact with the minority banks 

that OTS regulates. The national coordinator participates in the 

interagency coordination meetings with the other banking regulators and 

works with the regional community affairs staff to compile the agency’s 

annual report to Congress on minority bank issues. OCC and the Federal 

Reserve do not have similar structures in place. However, OCC does have 

an agency ombudsman who maintains contact with minority banks and a 

senior adviser for external outreach and minority affairs who participates 

in the interagency coordination meetings. Officials from the Federal 

Reserve—which directly supervises the fewest number of minority 

banks—told us that Federal Reserve staff at the district level maintain 

frequent contact with minority banks under their purview and Federal 

Reserve staff participate in interagency coordination meetings. 

Staffing Structure 

FDIC has a public Web page dedicated specifically to minority banking 

issues that includes FDIC’s list of all minority banks, staff contacts, links 

to trade associations and other relevant sites, and a link to provide 

feedback on FDIC’s minority banking efforts. FDIC officials told us that 

the feedback link has been on their Web page since 2002 but that the 

agency rarely receives feedback from minority banks. FDIC is planning to 

improve its Web page by adding a link to FDIC’s home page and additional 

resources, including research highlighting issues relevant to minority 

banks. 

Web Pages 

OCC also has a Web page that contains some information on minority 

bank issues. The Web site containing this page, BankNet, is available to 

registered national banks. OCC’s Web site is not as extensive as FDIC’s but 

does contain a list of minority banks that OCC regulates, links to OCC’s 

minority bank policy statement, and a comparative analysis tool to 

Page 22 GAO-07-6 Minority Banks 
compare the financial performance of minority banks with that of their 

peers. 

FDIC has taken the lead role in sponsoring, hosting, and coordinating with 

the other regulators events in support of minority banks. These events 

have included 

Minority Bank Events and 

Training 

• A national conference in 2001, which was attended by about 70 minority 

banks supervised by different banking regulators and in which all four 

banking regulators participated. Participants discussed challenges, shared 

best practices, and evaluated possible actions regulators could take to 

preserve minority banks. 

• In August 2006, FDIC sponsored a national conference for minority banks 

in which representatives from OTS, OCC, and the Federal Reserve 

participated. 

• Regional forums and conferences, which were organized after 2002 to 

follow up on the national conference and implement initiatives set forth in 

FDIC’s 2002 policy statement. FDIC officials told us that these events are 

held annually by each of their regional offices. The content of these events 

has varied among regions, but has included issues relating to safety and 

soundness and compliance examinations, community affairs, deposit 

insurance, and FDIC’s minority banking program. Representatives from 

other banking agencies have participated in these events. 

• The Minority Bankers Roundtable (MBR) series, which FDIC officials told 

us was designed to provide insight into the regulatory relationship 

between minority banks and FDIC and explore opportunities for 

partnerships between FDIC and these banks. In 2005, FDIC held six 

roundtables around the country for minority banks supervised by all of the 

regulators. 

Other regulators have also held events in support of minority banks. For 

example: 

• In May 2006, the Director, Deputy Director, and the Northeast Regional 

Director of OTS held a meeting in New York in which all of the OTSregulated minority banks in the region participated. The issues discussed 

included ways to strengthen community development and investment 

activities and partnerships with community-based organizations, and other 

issues of concern. 

Page 23 GAO-07-6 Minority Banks 
• In 2002, OCC held a forum with the North American Native Bankers 

Associations and a Native American bank and have created publications 

on banking in Native American communities. In February 2006, OCC held 

an event for several chief executive officers from African-American 

national banks to meet with OCC’s Executive Committee and the 

Comptroller of the Currency to discuss the challenges these banks faced. 

• Federal Reserve banks have hosted workshops and other events for Native 

American banks, as well as produced publications on Native American 

banking. 

Outside of the customary training and educational programs that 

regulators make available to all banks, FDIC is the only regulator to 

convene training sessions only for minority banks (including minority 

banks not regulated by FDIC) that the banks may attend free of charge. 

FDIC officials told us that the agency’s regional offices have held several 

such training sessions on an as-needed basis or when suggested at 

minority bank events. For example, FDIC’s Dallas regional office has 

conducted 1-day seminars in 2004 and 2005 specifically for minority banks 

that included presentations on compliance, the Bank Secrecy Act and antimoney-laundering issues, and economic and banking conditions. 

All of the federal banking regulators told us that they provided their 

minority banks with technical assistance if requested, but only FDIC and 

OTS have specific procedures for offering this assistance. More 

specifically, FDIC and OTS officials told us that they proactively seek to 

make minority banks aware of such assistance through established 

outreach procedures outside of their customary examination and 

supervision processes. FDIC also has a policy that requires its regional 

coordinators to ensure that examination case managers contact minority 

banks 90 to 120 days after an examination to offer technical assistance in 

any problem areas that were identified during the examination. This policy 

is unique to minority banks. As part of their quarterly reports to 

headquarters, FDIC regional coordinators report on how many offers of 

technical assistance they have made to minority banks and how many 

banks requested the assistance. More generally, FDIC staff contact the 

minority banks they supervise at least once a year to offer to have a 

member of regional management meet with banks’ board of directors and 

to familiarize the institutions with FDIC’s initiatives. 

Technical Assistance and Other 

Outreach Procedures 

OTS officials told us that technical assistance is the focus of their minority 

banks efforts. According to the agency’s policy statement, OTS monitors 

the financial condition of minority banks to identify those that might 

Page 24 GAO-07-6 Minority Banks 
benefit from a program of increased support and technical assistance. OTS 

regional staff contact minority banks they supervise annually to make 

them aware of their minority bank efforts and to offer to meet with the 

banks’ boards of directors to discuss issues of interest and types of 

assistance OTS can provide. 

Additionally, FDIC and OTS officials told us that they have taken proactive 

steps to assist individuals or groups that have filed applications for deposit 

insurance or to acquire a national thrift charter. FDIC officials said that 

they had developed a package of assistance to help smaller institutions, 

including many minority banks, overcome challenges associated with the 

FDIC insurance application process. OTS officials said that they had 

provided substantial assistance to a minority group that filed to acquire a 

national thrift charter and had extended established application deadlines 

to assist the group. FDIC officials said that the agency interprets FIRREA’s 

general goal to “promote and preserve” minority banks as a charge to 

support those minority banks already in existence or those that have filed 

deposit insurance applications rather than as a charge to actively seek out 

minority groups or individuals to form new banks. FDIC officials 

explained that the agency was an insurer, not a chartering authority, and 

that it would probably be inappropriate to encourage potential applicants 

to choose one banking charter over another. OTS officials told us that the 

agency currently does not promote the thrift charter to any groups but is 

considering the extent to which it might do so in the future. 

OCC and the Federal Reserve provide technical assistance to all of their 

banks, but they currently have not established outreach procedures for all 

their minority banks outside of the customary examination and 

supervision processes. However, OCC officials told us that the agency 

would be designing an outreach plan for all of OCC’s minority banks this 

fiscal year. Federal Reserve officials told us that Federal Reserve districts 

conduct informal outreach to their minority banks and consult with other 

districts on minority bank issues as needed. The officials said that four 

reserve banks had begun a pilot outreach program specifically tailored to 

minority banks that would include technical assistance, training, advisory 

visits, and ongoing analysis. Staff are in the process of conducting 

interviews with minority banks to obtain input on their draft program. 

OCC and Federal Reserve officials told us that, like FDIC and OTS, their 

agencies also provided assistance to minority groups during the 

application process and that they put forth extra effort in certain cases. 

For example, Federal Reserve officials told us that they had recently 

assisted 15 sovereign tribal nations in establishing a Native American 

Page 25 GAO-07-6 Minority Banks 
bank. And like FDIC and OTS, neither OCC nor the Federal Reserve seeks 

out individuals to form either minority or nonminority banks. OCC agency 

officials said it would not be appropriate for their agency to do so, and 

Federal Reserve officials told us that it was not within their jurisdiction to 

do so, as they did not have authority to charter banks. The Federal 

Reserve, however, has conducted activities such as providing information 

to Native American, Muslim, and Asian-American communities on entering 

the banking business. 

FDIC has developed policies for failing banks that are consistent with 

FIRREA’s requirement that the agency work to preserve the minority 

character of minority banks in cases of mergers and acquisitions. For 

example, FDIC maintains a list of qualified minority banks or minority 

investors that may be invited to bid on the assets of troubled minority 

banks that are expected to fail. Officials from several minority banks we 

contacted said that FDIC had invited them to bid on failing minority banks. 

However, as we pointed out in our 1993 report, FDIC is required to accept 

the bids on failing banks that pose the lowest expected cost to the Deposit 

Insurance Fund.26 As a result, all bidders, including minorities, are subject 

to competition. FDIC provided us with a list of minority banks that had 

failed from 1990 to 2005. Of the 20 minority banks that failed during this 

period, 12 were acquired by nonminority banks and 5 by minority banks, 

while 3 were resolved through deposit payoffs. According to FDIC, the 

most recent failures of minority banks were two institutions in 2002, 

neither of which retained its minority status. 

Policies to Preserve the 

Minority Character of Troubled 

Banks 

OTS and OCC’s policy statements on minority banks describe how the 

agencies are to work with FDIC to identify qualified minority banks or 

minority investors to acquire minority banks that are failing. Federal 

Reserve officials told us that they do not have a similar written policy, 

given the small number of minority banks the agency supervises. However, 

agency officials said that they work with FDIC to identify qualified 

minority banks or investors to acquire failing minority banks. 

Officials from the four banking agencies said that they also tried to assist 

troubled minority banks to help improve their financial condition before a 

bank deteriorated to the point at which a resolution through FDIC was 

 

26Section 13(c) of the Federal Deposit Insurance Act [12 U.S.C. § 1823(c)], as amended in 

1991, prohibits FDIC from engaging in the assisted resolution of any failed depository 

institution unless FDIC determines that the total amount of expenditures and obligations it 

will incur is the least costly alternative. 

Page 26 GAO-07-6 Minority Banks 
necessary. For example, officials from OCC, Federal Reserve, and OTS 

said that they provided technical assistance to such institutions or tried to 

identify other minority banks or investors that might be willing to acquire 

or merge with them. 

Section 308 of FIRREA required the Secretary of the Treasury to consult 

with FDIC and OTS to determine the best methods for meeting FIRREA’s 

goals in support of minority banks. In 1993, we reported that Treasury 

initially convened interagency meetings to facilitate communication 

among the federal banking regulators on minority banking issues. 

Treasury convened four such meetings between 1990 and 1993 at which 

regulators exchanged ideas, discussed policies regarding minority banks, 

and worked to coordinate their efforts. However, during our work for this 

report, Treasury officials said that the department no longer convened or 

participated regularly in interagency discussions on minority banking 

issues, although it still consulted with the federal banking regulators as 

issues arose. Treasury officials explained that while the nature of the 

FIRREA consulting requirement could be open to some interpretation, 

given that Treasury had discontinued formal consultations in 1993, the 

general view within the department is that ongoing consultations were not 

required. Further, Treasury officials said the department’s authority to 

assist the banking regulators in preserving the minority character of failing 

minority banks was limited by federal legislation that prohibits the 

Secretary of the Treasury from intervening in matters or proceedings that 

are before the Director of OTS or the Comptroller of the Currency, unless 

otherwise specifically provided by law.27 According to these officials, 

Section 308 of FIRREA does not override this prohibition, which is also 

consistent with Treasury’s policy not to intervene in case-specific matters 

before the banking agencies. 

While FDIC has recently been proactive in assessing its support efforts for 

minority banks, none of the regulators have routinely and 

comprehensively surveyed their minority banks on all issues affecting the 

institutions, nor have the regulators established outcome-oriented 

performance measures. Evaluating the effectiveness of federal programs is 

vitally important in order to manage programs successfully and improve 

program results. To this end, in 1993 Congress enacted the Government 

Treasury No Longer 

Regularly Consults with 

Regulators on Minority 

Bank Issues but Does 

Consult on an As-Needed 

Basis 

Regulators Do Not Assess 

Efforts through 

Comprehensive Surveys or 

Outcome-Oriented 

Performance Measures 

 

2712 U.S.C. § 1462a(b)(3) and 12 U.S.C. § 1. 

Page 27 GAO-07-6 Minority Banks 
Performance and Results Act, which instituted a governmentwide 

requirement that agencies report on their results in achieving their agency 

and program goals.28 Agencies can evaluate the effectiveness of their 

efforts by establishing performance measures or through program 

evaluation.29 Performance measures are established in order to assess 

whether a program has achieved its objectives and are expressed as 

measurable, quantifiable indicators. Outcome-oriented performance 

measures assess a program activity by comparing it to its intended 

purpose or targets.30 Program evaluations are systematic studies that are 

conducted periodically to assess how well a program is working. In our 

1993 report, we recommended that FDIC and OTS periodically survey 

minority banks that they regulate to help assess their support efforts. 

Surveys are an instrument by which agencies may assess their efforts and 

obtain feedback from the recipients of their efforts on areas for 

improvement. 

As part of its assessment methods, FDIC has recently conducted 

roundtables and surveyed minority banks on aspects of its minority bank 

efforts, as follows: 

• In 2004, in response to an FDIC Corporate Performance Objective to 

enhance minority bank outreach efforts, FDIC completed a review of its 

minority bank outreach program that included a survey of 20 minority 

banks from different regulators. Seven banks responded. On the basis of 

the 2004 review, FDIC established the MBR program to gain insights into 

issues affecting minority banks and obtain feedback on its efforts. 

• In 2005, FDIC requested feedback on its minority bank efforts from 

institutions that attended the agency’s six MBRs (which approximately 

one-third of minority banks attended). The agency also sent a survey letter 

to all minority banks to seek their feedback on several proposals to better 

serve such institutions, but only 24 minority banks responded. The 

proposals included holding another national minority bank conference, 

instituting a partnership program with universities, and developing a 

 

28GAO, Managing for Results: Enhancing Agency Use Performance Information for 

Management Decision Making, GAO-05-927 (Washington, D.C.: Sept. 9, 2005); and GAO, 

The Results Act: An Evaluator’s Guide to Assessing Agency Annual Performance Plan, 

GAO/GGD-10.1.20 (Washington, D.C.: April 1998). 

29GAO, Performance Measurement and Evaluation: Definition and Relationship, GAO-05-

739SP (Washington, D.C.: May 2005). 

30Government Performance and Results Act of 1993 § 7, 39 U.S.C. 2801(1). 

Page 28 GAO-07-6 Minority Banks 
minority bank museum exhibition.31 FDIC officials said that they used the 

information gathered from the MBRs and the survey to develop 

recommendations for improving programs and developing new initiatives. 

According to FDIC officials, these recommendations, which have been 

approved and are expected to be implemented by the end of 2006, include 

• enhancing the agency’s minority bank Web page by (1) adding a link to 

FDIC’s home page, (2) including a calendar of minority bank events, 

and (3) adding more resource links, such as links to research 

highlighting issues relevant to minority banks; 

• hosting another national conference for minority banks—the 

conference was held in August 2006; 

• continuing the MBR series and hosting six more roundtables in 2006; 

and 

• instituting the University Partnership Program, through which FDIC 

and minority bank staff would advise and lecture at universities that 

have an emphasis on minority student enrollment. The goals of the 

program include enhancing recruiting efforts for minority banks and 

FDIC and increasing students’ knowledge base of banking in general 

and minority banks in particular. 

While recently FDIC has taken steps to assess the effectiveness of its 

minority bank support efforts, we identified some limitations in the 

agency’s approach. For example, in its surveys of minority banks, the 

agency did not solicit feedback on key aspects of its support efforts, such 

as the provision of technical assistance. Moreover, FDIC has not 

established outcome-oriented performance measures to gauge the 

effectiveness of its various support efforts. As discussed previously, in its 

quarterly reports FDIC has provided output measures that track the 

number of technical assistance offers it makes to minority banks and the 

number of banks making use of the assistance. FDIC also requires regional 

case managers to follow up with minority banks 90 to 120 days after 

examinations to offer technical assistance to address deficiencies that 

 

31This project was to develop a museum exhibition that would trace the history of minority 

banks in the United States. However, after conducting additional research on this proposal, 

FDIC is currently not pursuing the project, in part because of limited interest from some 

minority banks. 

Page 29 GAO-07-6 Minority Banks 
have been identified in examinations. However, FDIC does not report 

agencywide on the extent to which minority banks are able to resolve any 

deficiencies found during the examination process. 

FDIC officials told us while the agency has not conducted surveys 

regarding technical assistance or developed related performance 

measures, technical issues may be resolved during the course of the 

examination process. Further, FDIC officials said that throughout the 

examination process and through other agency contacts, minority banks 

may informally provide feedback on the effectiveness of any assistance 

provided. However, without surveys or agencywide outcome-oriented 

performance measures, FDIC management may lack comprehensive and 

reliable information necessary to help ensure that agency staff provide 

effective technical assistance to minority banks to help them resolve 

problems identified in examinations or through other means. Further, the 

public and stakeholders, such as Congress, may not be informed as to the 

effectiveness of the agency’s technical assistance, as well as other efforts 

in support of minority banks. 

In 1994-1995, OTS interviewed the 40 minority banks that it regulated to 

obtain their views on the agency’s support efforts. The interviews covered 

topics such as the banks’ overall impressions of the agency’s efforts, 

technical assistance, and application issues and asked for suggestions for 

improving OTS’s efforts to support minority banks. However, OTS has not 

conducted a similar effort since that time. OTS officials told us that in 2003 

and 2004 the agency conducted surveys of all OTS-regulated institutions 

and that a 2006 survey is in process. Because of restrictions imposed by 

the Office of Management and Budget on the amount of information that 

can be collected from institutions, OTS officials told us that they surveyed 

all of their banks at the same time. The surveys solicited feedback on 

OTS’s examination process and provided opportunities for banks to make 

suggestions for improving OTS’s operations. While OTS officials stated 

that the results from these surveys could be sorted by minority status, and 

has plans to do so and use the information for program enhancement, such 

analysis has not been conducted. 

As required under Section 3 of FIRREA, OTS provides annual reports to 

Congress that, among other things, track technical assistance offers made 

to minority banks. But OTS has also not established quantifiable outcomeoriented measures to gauge the quality and effectiveness of technical 

assistance. 

Page 30 GAO-07-6 Minority Banks 
OCC and Federal Reserve officials told us that they had not surveyed the 

minority banks that they regulated to assess the effectiveness of their 

support efforts, and neither agency has established performance measures 

related to minority banking efforts. OCC officials explained that the 

agency did not survey minority banks because it did not treat these banks 

any differently from other banks. However, as described earlier, OCC has a 

written policy statement for minority banks, information on a Web page 

for such institutions, and has held events on Native American banking. 

OCC officials also told us that they recently convened a forum for AfricanAmerican bankers and were in the process of developing an outreach 

program specifically for its minority banks. 

By not periodically surveying and obtaining comprehensive feedback from 

a substantial number of minority banks or through developing outcomeoriented performance measures for various support efforts (such as 

technical assistance), the regulators are not well positioned to assess their 

support efforts or identify areas for improvement. Further, the regulators 

cannot take corrective action as necessary to provide better support 

efforts to minority banks. 

Minority bank survey respondents identified potential limitations in the 

regulators’ efforts to support them and related regulatory issues, such as 

examiners’ understanding of issues affecting minority banks, which would 

likely be of significance to agency managers and warrant follow-up 

analysis. Minority banks regulated by FDIC were generally more positive 

about the agency’s efforts than other banks were about their regulators’ 

efforts. Still, only about half of FDIC-regulated banks gave their regulator 

very good or good marks, whereas about a quarter of banks regulated by 

other agencies gave the same ratings. Although some regulators 

emphasized technical assistance as a key component of their efforts to 

support minority banks, relatively few institutions used such assistance. 

Further, in our interviews and open-ended survey responses, banks 

reported some specific concerns about regulatory issues related to their 

minority status. In particular, survey respondents were concerned that (1) 

examiners, as was also noted in our 1993 report, did not always 

understand their operating environment or the challenges that minority 

banks faced in their communities and might need more training on the 

topic, and (2) a provision of CRA designed to facilitate relationships 

between minority banks and other banks has not produced the desired 

results. 

Survey of Minority 

Banks Identified 

Potential Limitations 

in Regulators’ Support 

Efforts and Other 

Regulatory Issues 

Page 31 GAO-07-6 Minority Banks 
When minority bankers were asked to rate regulators’ overall efforts to 

support minority banks, responses varied. Some 36 percent of survey 

respondents described the efforts as very good or good, 26 percent 

described them as fair, and 13 percent described the efforts as poor or 

very poor (fig. 7). A relatively large percentage—25 percent—responded 

“don’t know” to this question. Banks’ responses varied by regulator, with 

45 percent of banks regulated by FDIC giving very good or good 

responses, compared with about a quarter of banks regulated by other 

agencies.32 However, more than half of FDIC-regulated banks and about 

three-quarters of the other minority banks responded that their regulator’s 

efforts were fair, poor, or very poor or responded with a “don’t know.” In 

particular, banks regulated by OTS gave the highest percentage of poor or 

very poor marks, while banks regulated by the Federal Reserve most often 

provided fair marks.33

About a Third of Survey 

Respondents Viewed 

Regulators’ Minority Bank 

Support Efforts as Very 

Good or Good, and 

Technical Assistance 

Usage Appeared Low 

 

32We were requested to report on all the banking regulators’ minority bank efforts and to 

obtain minority banks’ views on these efforts. However, the banking regulators have 

different definitions for banks they consider to be minority and eligible to participate in 

their minority bank efforts (see app. II). In our population of minority banks we included 

any bank considered by at least one regulator to be eligible to participate in its efforts. In 

some cases, we surveyed minority banks that were not considered by their primary 

regulator to be minority institutions but were considered to have minority status or be 

eligible for participation in another regulator’s efforts. Nine of the 80 FDIC minority banks 

responding were such cases, as were 4 of the 18 Federal Reserve minority banks, 1 of the 

18 OTS banks, and 2 of the 33 OCC banks. We reviewed these banks’ responses to key 

survey questions in total and by each regulator and found that they did not have a material 

negative or positive impact on the survey results, and would generally have changed results 

by 1 or 2 percentage points. For example, if these banks were removed from the survey 

results, the percentage of minority banks who responded that their regulator’s overall 

efforts to support minority banks were very good or good would be 1 percentage point 

higher. In a few cases, the inclusion of banks not viewed by their regulators as minority 

institutions changed the survey results by regulator by 4 or 5 percentage points in a manner 

favorable to the regulator. However, the inclusion of such banks did not have a material 

effect on the overall results. For example, if banks not viewed by FDIC as minority banks 

were removed from the survey results, the percentage of institutions rating the agencies’ 

overall support efforts as very good or good would increase from 45 percent to 49 percent. 

33See appendix III for the survey responses in this report discussed as the number of 

minority bank responses. 

Page 32 GAO-07-6 Minority Banks 
Figure 7: Minority Banks’ Ratings of Support Efforts, by Regulator 

Percentage

Source: GAO.

0

20

40

60

80

100

Federal OCC OTS

Reserve

Total FDIC

Don’t know

Poor/very poor

Fair

Very good/good

Nearly half of minority banks reported that they attended FDIC 

roundtables and conferences designed for minority banks, and about half 

of the 65 respondents that attended these events found them to be 

extremely or very useful (fig. 8). Almost a third found them to be 

moderately useful, and 17 percent found them to be slightly or not at all 

useful. One participant commented, “The information provided was useful, 

as was the opportunity to meet the regulators.” Many banks also 

commented that the events provided a good opportunity to network and 

share ideas with other minority banks. 

Page 33 GAO-07-6 Minority Banks 
Figure 8: Usefulness of FDIC’s Roundtables and Conferences, by Regulator 

Percentage

Source: GAO.

0

20

40

60

80

100

Federal OCC OTS

Reserve

Total FDIC

Don’t know

Slightly or not at all useful

Moderately useful

Extremely or very useful

We noted that minority banks frequently reported participating in training 

and education events and that they found these events extremely or very 

useful, even though most of these programs were not designed specifically 

for minority banks. About 58 percent reported participating in their 

regulator’s training and education activities—a higher percentage than had 

participated in FDIC roundtables and conferences. Of this group, 76 

percent found training and education to be extremely or very useful, 15 

found it to be moderately useful, 6 percent found it to be slightly useful, 

and 3 percent did not know. 

While FDIC and OTS emphasized technical services as key components of 

their efforts to support minority banks, less than 30 percent of the 

institutions they regulate reported using such assistance within the last 3 

years in our survey (fig. 9). Minority banks regulated by OCC and the 

Federal Reserve reported similarly low usage of the agencies’ technical 

assistance services. However, of the few banks that used technical 

Page 34 GAO-07-6 Minority Banks 
assistance—41—the majority rated the assistance provided as extremely 

or very useful.34 Further, although small minority banks and AfricanAmerican banks of all sizes have consistently faced financial challenges 

and may benefit from certain types of assistance, these banks also 

reported low rates of usage of the agencies’ technical assistance. In 

addition, both regulators and minority banks explained that minority 

banks often have difficulty attracting and retaining qualified staff, and 

given this fact, technical assistance could be particularly important in 

providing these banks with guidance tailored to their staff’s specific needs. 

While our survey did not address the reasons that relatively few minority 

banks appear to use the agencies’ technical assistance and banking 

regulators cannot compel banks under their supervision to make use of 

offered technical assistance, the potential exists that many such 

institutions may be missing opportunities to learn how to correct 

problems that limit their operational and financial performance. 

 

34The survey did find that minority banks regulated by FDIC and OTS were more aware of 

the agencies’ technical assistance outreach efforts than institutions regulated by OCC and 

the Federal Reserve. This finding is consistent with the fact that FDIC and OTS have 

formalized technical assistance outreach efforts, while the other regulators do not. 

Page 35 GAO-07-6 Minority Banks 
Figure 9: Minority Banks’ Use of Technical Assistance, by Regulator 

Percentage

Source: GAO.

0

20

40

60

80

100

Federal OCC OTS

Reserve

Total FDIC

Don’t know

Not used

Used

Survey Respondents 

Expressed Concerns about 

the Examination Process 

and a Provision of CRA 

Designed to Assist 

Minority Banks 

Over 80 percent of the minority banks we surveyed responded that their 

regulators did a very good or good job of administering examinations, and 

almost 90 percent felt that they had very good or good relationships with 

their regulator. However, as in our 1993 report, some minority bank 

officials said in both survey responses and interviews that examiners did 

not always understand the challenges the banks faced in providing 

services in their particular communities. Twenty-one percent of survey 

responses mentioned this issue when asked for suggestions about how 

regulators could improve their efforts to support minority banks, and 

several minority banks we spoke with in interviews elaborated on this 

topic. 

The bank officials said that examiners tended to treat minority banks like 

any other bank when they conducted examinations and thought such 

comparisons were not appropriate. For example, some bank officials 

whose institutions serve immigrant communities said that their customers 

tended to do business in cash and carried a significant amount of cash 

Page 36 GAO-07-6 Minority Banks 
because banking services were not widely available or trusted in the 

customers’ home countries. Bank officials said that examiners sometimes 

commented negatively on the practice of customers doing business in cash 

or placed the bank under increased scrutiny with respect to the Bank 

Secrecy Act’s requirements for cash transactions.35 While the bank officials 

said that they did not expect preferential treatment in the examination 

process, several suggested that examiners undergo additional training so 

that they could better understand minority banks and the communities 

that these institutions served. FDIC has conducted such training for its 

examiners. In 2004, FDIC invited the president of a minority bank to speak 

to about 500 FDIC examiners on the uniqueness of minority banks and the 

examination process. FDIC officials later reported that the examiners 

found the discussion helpful. According to a Federal Reserve official, the 

organization is developing guidance to better educate examination staff 

about the various types of minority institutions and minority communities. 

Also, according to an OCC official, OCC has an initiative under 

consideration to provide training for its examiners on minority bank 

issues. 

Many survey respondents also said that a provision in the Community 

Reinvestment Act (CRA) that was designed to assist their institutions was 

not effectively achieving this goal. CRA requires bank regulators to 

encourage institutions to help meet credit needs in all areas of the 

communities they served. The act includes a provision allowing regulators 

conducting a CRA examination to give consideration to banks that assist 

minority banks through capital investment, loan participations, and other 

ventures that help meet the credit needs of local communities. Despite this 

provision, only about 18 percent of survey respondents said that CRA 

had—to a very great or great extent—encouraged other institutions to 

invest in or form partnerships with their institutions, while more than half 

said that CRA encouraged such activities to some, little, or no extent (fig. 

10). Some minority bank officials said that current interagency guidance 

on the provision granting consideration for investments in minority banks 

should be clarified to assure banks that they will receive CRA 

 

35The body of law commonly referred to as the Bank Secrecy Act (BSA) is codified at 31 

U.S.C. §§ 5311-5322 and 12 U.S.C. §§ 1829b and 1951–1959. The purpose of BSA is to 

prevent financial institutions from being used as intermediaries for the transfer or deposit 

of money derived from criminal activity and to provide a paper trail for law enforcement 

agencies in their investigations of possible money laundering. The federal banking 

regulators review institutions for compliance with the BSA as part of their safety and 

soundness examinations or in targeted examinations focused on BSA compliance. 

Page 37 GAO-07-6 Minority Banks 
consideration for such investments. Some minority banks believe that 

CRA does not provide incentives for nonminority banks to make 

investments in minority banks that operate in other parts of the country. A 

minority bank official said that the CRA provision does not clearly state 

that a bank making an investment in a minority bank that is outside of its 

CRA assessment area will receive consideration for such investments in its 

CRA compliance examinations. However, officials from each of the four 

regulators said that they had interpreted the provision in CRA as allowing 

consideration for such out-of-area investments in minority banks. OCC 

recently published guidance clarifying this issue, and FDIC officials said 

that the agencies would clarify the guidance provided to all CRA 

examiners across agencies on such investments. 

Figure 10: Minority Banks’ Evaluation of the Extent to Which CRA Has Encouraged 

Partnerships with Other Institutions 

Percentage

Source: GAO.

0

10

20

30

40

50

60

70

80

90

100

 Don't

know 

Some/

little

or no

extent 

 Moderate

extent 

 Very

great/

great

extent 

This report does not contain all results from the survey. The survey and a 

more complete tabulation of the results can be viewed at GAO-07-7SP. 

Page 38 GAO-07-6 Minority Banks 
Federal banking regulators have adopted differing approaches to support 

minority banks but generally have not assessed their efforts using regular 

and comprehensive surveys of minority banks or outcome-oriented 

performance measures. FDIC, which along with OTS is required by 

FIRREA to help preserve and promote minority banks, has established the 

most comprehensive support efforts and has taken the lead on interagency 

initiatives. In this regard, FDIC appears to be serving a coordination and 

facilitation role for the banking agencies’ efforts. OTS has also taken 

several steps to support minority banks, while OCC and the Federal 

Reserve, which are not subject to Section 308 of FIRREA, have, on their 

own initiative, taken some steps to support such institutions. Further, 

officials from OCC and the Federal Reserve, which collectively supervise 

about one-third of minority banks, stated that they recognize the 

importance of minority banks and are planning additional efforts to 

support them. While these efforts may help ensure that more minority 

banks receive support, it is important that when managing both existing 

and new programs, regulators assess their effectiveness. While FDIC has 

recently sought to evaluate its efforts through conducting surveys, these 

surveys have not addressed all key activities (including the provision of 

technical assistance), and the agency has not established outcomeoriented performance measures. None of the other agencies regularly or 

comprehensively surveys minority banks regarding its support efforts or 

has developed outcome-oriented performance measures. Consequently, 

the regulators are not well positioned to identify issues of concern to 

minority banks or to take corrective actions to improve their support 

efforts. 

Conclusions 

Our work identified potential limitations in the regulators’ support efforts 

and related activities that would likely be of significance to agency 

managers and potentially warrant follow-up analysis and the initiation of 

corrective actions as necessary. For example, only about half of minority 

banks regulated by FDIC and only about a quarter regulated by the other 

agencies view their regulator’s support efforts as very good or good. We 

also found that some issues identified in our 1993 report may still be 

potential limitations to the regulators’ efforts. First, although regulators 

emphasize the provision of technical assistance services to minority 

banks, less than 30 percent of such banks have recently used such 

services. Small banks and African-American banks, which have struggled 

financially over the years and potentially stand to benefit most from 

additional technical assistance, are no more likely than other minority 

banks to use such assistance. While there may be a variety of reasons that 

minority banks do not take advantage of the regulators’ technical 

assistance services and regulators cannot compel banks to use this 

Page 39 GAO-07-6 Minority Banks 
assistance, without soliciting further feedback from these banks, the 

regulators cannot identify these reasons, determine whether more banks 

would benefit from such assistance, or obtain suggestions for 

improvement. Second, both our 1993 report and our current analysis found 

that some minority banks believe that regulators have not ensured that 

examiners fully understand the challenges that such institutions often face 

in, for example, providing financial services in areas with high 

concentrations of poverty or to immigrant communities. Again, without 

further analysis and soliciting feedback from banks, regulators cannot 

identify possible areas where they can provide additional assistance or 

take corrective action. By establishing outcome-oriented performance 

measures to determine the extent to which they are achieving program 

goals, regulators could then measure the progress of their efforts and any 

results. Using existing interagency forums for coordination to assess 

minority bank support efforts and related regulatory activities could help 

ensure that all minority banks have access to the same opportunities while 

minimizing burdens on the regulators themselves. 

We recommend that the Chairman of the FDIC, the Director of OTS, the 

Comptroller of the Currency, and the Chairman of the Federal Reserve 

regularly review the effectiveness of their minority bank support efforts 

and related regulatory activities and, as appropriate, assess the need to 

make changes necessary to better serve such institutions. In conducting 

such reviews, the regulators should consider 

Recommendation for 

Executive Action 

• conducting periodic surveys of such institutions to determine how they 

view regulators’ minority support efforts and related activities, and/or 

• developing outcome-oriented performance measures to assess the 

progress of their efforts in relation to program goals. 

As part of these regular program assessments, the regulators may wish to 

focus on such areas as minority banks’ overall views on support efforts, 

the usage and effectiveness of technical assistance services (particularly 

technical assistance provided to small minority banks and AfricanAmerican banks), and the level of training provided to agency examiners 

regarding minority banks and their operating environments. Regulators 

may also wish to utilize existing interagency coordination processes in 

implementing this recommendation to help ensure consistent efforts and 

minimize burdens on agency staff. 

Page 40 GAO-07-6 Minority Banks 
Agency Comments 

and Our Evaluation 

We provided a draft of this report to FDIC, OTS, OCC, and the Federal 

Reserve for comment, and they provided written comments that are 

reprinted in appendixes IV–VII. In their responses, the agencies further 

elaborated on their efforts to support minority banks and described 

planned initiatives. Further, FDIC, OTS, and OCC agreed to implement our 

recommendation, while the Federal Reserve commented that it would 

consider implementing the recommendation. The agencies also provided 

technical comments, which we have incorporated as appropriate. We also 

requested comments from the Department of the Treasury on the section 

of the draft report relevant to their activities under Section 308 of FIRREA. 

Treasury provided us with technical comments, which we have 

incorporated as appropriate. 

We will provide copies to Chairman of the FDIC, the Director of OTS, the 

Comptroller of the Currency, the Chairman of the Federal Reserve, and the 

Secretary of the Department of the Treasury, and other interested 

congressional committees. We will also make copies available to others 

upon request. In addition, the report will be available at no charge on the 

GAO Web site at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me 

at (202) 512-7215 or scottg@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report at 

listed in appendix VIII. 

George A. Scott 

Acting Director, Financial Markets 

 and Community Investment 

Page 41 GAO-07-6 Minority Banks 
List of Requesters 

The Honorable Barney Frank 

Ranking Minority Member 

Committee on Financial Services 

House of Representatives 

The Honorable Gary Ackerman 

House of Representatives 

The Honorable Joe Baca 

House of Representatives 

The Honorable Michael E. Capuano 

House of Representatives 

The Honorable Julia Carson 

House of Representatives 

The Honorable Wm. Lacy Clay 

House of Representatives 

The Honorable Emanuel Cleaver 

House of Representatives 

The Honorable Joseph Crowley 

House of Representatives 

The Honorable Artur Davis 

House of Representatives 

The Honorable Harold E. Ford, Jr. 

House of Representatives 

The Honorable Al Green 

House of Representatives 

The Honorable Luis V. Gutierrez 

House of Representatives 

The Honorable Ruben Hinojosa 

House of Representatives 

Page 42 GAO-07-6 Minority Banks 
The Honorable Darlene Hooley 

House of Representatives 

The Honorable Steve Israel 

House of Representatives 

The Honorable Paul E. Kanjorski 

House of Representatives 

The Honorable Barbara Lee 

House of Representatives 

The Honorable Stephen F. Lynch 

House of Representatives 

The Honorable Carolyn B. Maloney 

House of Representatives 

The Honorable Carolyn McCarthy 

House of Representatives 

The Honorable Gregory W. Meeks 

House of Representatives 

The Honorable Brad Miller 

House of Representatives 

The Honorable Dennis Moore 

House of Representatives 

The Honorable Gwen Moore 

House of Representatives 

The Honorable Bernard Sanders 

House of Representatives 

The Honorable Debbie Wasserman Schultz 

House of Representatives 

The Honorable David Scott 

House of Representatives 

Page 43 GAO-07-6 Minority Banks 
The Honorable Melvin L. Watt 

House of Representatives 

The Honorable Maxine Waters 

House of Representatives 

Page 44 GAO-07-6 Minority Banks 
Appendix I: Objectives, Scope, and Appendix I: Objectives, Scope, and Methodology 

Methodology 

The objectives of this report were to (1) review the profitability of 

minority banks over time, (2) identify the federal banking regulators’ 

efforts to support minority banks and determine whether the regulators 

were evaluating the effectiveness of these efforts, and (3) obtain the views 

of minority banks on the federal regulators’ minority banking support 

efforts and related regulatory issues. 

To review the profitability of minority banks, in addition to undertaking a 

literature review, we analyzed financial data provided by the Federal 

Deposit Insurance Corporation (FDIC) for year end 2005, 2000, and 1995. 

Each bank is required to file consolidated Reports of Condition and 

Income (Call Report) data, and each thrift institution is required to file 

Thrift Financial Reports (Thrift Report) quarterly. We obtained Call and 

Thrift Report data from FDIC listing each minority bank’s financial 

characteristics (such as return on assets, net income, and loan loss 

provisions), along with summary statistics for peer groups. Peer groups 

were formed by FDIC based on standard asset sizes used in FDIC reports 

(less than $100 million, $100 million-$300 million, $300 million-$500 

million, $500 million-$1 billion, $1billion-$10 billion, greater than $10 

billion). The peer groups include minority and nonminority institutions. 

Using these data, we classified the minority banks by asset size and 

minority status. To classify the banks by minority status, we used the 

regulators’ designations and confirmed these classifications with a bank’s 

survey response (if the banks responded to our survey). FDIC provided 

summary statistics for peer groups based on asset size. The peer groups 

included all banks of a given asset size, including minority banks. We did 

not attempt to remove minority banks from the peer group to simplify the 

analysis because minority banks are so few, it is unlikely that their 

inclusion in the peer group would change composite statistics for any peer 

group. We analyzed the profitability characteristics of each group and 

compared the summary statistics to the comparable statistics generated by 

FDIC for relevant peer groups. 

Because information on minority banks was not available for both 2000 

and 1995 from all federal banking regulators, for these periods we 

analyzed data only for those minority banks that were still operating as 

minority banks in 2005. On the basis of the regulators’ lists, we were aware 

that not all of the banks were operating in 2005 were operating in previous 

years. In 2000, 181 of these banks were operating, and 152 were operating 

in 1995. Minority banks that failed or merged with other institutions 

between 1995 and 2005 are not included in the analysis for those years. In 

addition, we did not obtain data on the minority status of banks operating 

Page 45 GAO-07-6 Minority Banks 
Appendix I: Objectives, Scope, and 

Methodology 

in 1995 and 2000 and were unable to confirm that all 2005 minority banks 

were operating as minority banks in 1995 and 2000, although the change of 

ownership rate for minority banks is low. 

We chose to use Call and Thrift Report data because it was designed to 

provide information on all federally insured banks’ financial condition and 

has been collected and reported by FDIC in a standardized format. We 

have tested the reliability of FDIC’s Call and Thrift Report databases 

during previous studies and found the data to be reliable.1

 As with any selfreported financial information, however, the data are subject to change for 

a variety of reasons. We corroborated our analysis of the Call and Thrift 

Report data with other studies, which also found that minority banks lag in 

profitability and have high operating expenses.2

To address the second objective, we interviewed officials at the federal 

banking agencies and the Department of the Treasury and reviewed 

regulators’ documentation addressing their efforts to support minority 

banks and assess the effectiveness of these efforts. We also reviewed 

publicly available documentation maintained by the regulators, such as 

policy statements, lists of minority banks, Web sites, and public 

statements. We reviewed the regulators’ minority banking support efforts 

across the different banking agencies and compared any program 

assessment efforts with our standards for program assessment and 

performance measures, and those established in the Government 

Performance and Results Act.3

 We also interviewed 19 minority banks 

throughout the United States that we selected based on type of minority 

ownership and primary regulator, and relevant trade associations, to 

discuss the business environment in which they operate, regulators’ 

minority banking efforts, any assessment efforts undertaken by the 

regulators, and their knowledge and experience with their regulators’ 

minority banking efforts. 

 

1

For example, GAO, Industrial Loan Corporations: Recent Asset Growth and Commercial 

Interest Highlight Differences in Regulatory Authority, GAO-05-621 (Washington, D.C.: 

Sept. 2005), 87. 

2

Iqbal, Ramaswamy, Akhigbe, “The Output Efficiency of Minority-Owned Banks in the 

United States,” 113; Hasan and Hunter, “Management Efficiency in Minority- and Womenowned banks”; Lawrence, “The Viability of Minority-Owned Banks.” 

3

GAO-05-739SP, GAO-05-927, and GAO/GGD-10.1.20. 

Page 46 GAO-07-6 Minority Banks 
Appendix I: Objectives, Scope, and 

Methodology 

To obtain the views of minority banks on the federal regulators’ minority 

banking support efforts and related regulatory issues, we surveyed banks 

that were designated as minority institutions. We created a list of the 

population of minority banks by asking FDIC, Office of the Comptroller of 

the Currency (OCC), Federal Reserve, and Office of Thrift Supervision 

(OTS) for the names of all such institutions. The objective was to survey 

all minority banks that were officially recognized by regulators as such. Of 

the 204 institutions in our original population, 14 represented womenowned institutions. We identified the total minority bank population by 

reviewing and compiling one list of these banks from FDIC and the 

Federal Reserve’s lists as of September 30, 2005; OCC’s list from 

December 31, 2005; the most recent list from the Department of the 

Treasury (December 2004); and OTS’s list as of January 2006. 

All institutions we originally identified as minority banks were asked to 

complete a Web-based questionnaire in March of 2006. We determined that 

of the original 204 minority banks we identified, 9 were actually ineligible, 

either because the ownership was no longer minority or had insignificant 

minority interest, and some had merged with other banks. Our final survey 

population therefore consisted of 195 institutions. When the survey closed 

in late April, 149 of the 195 banks ultimately determined to be eligible 

minority banks had provided usable responses, for a response rate of 76 

percent. 

While developing our Web-based questionnaire, we asked all four banking 

regulators and minority banking associations to review a draft of the 

instrument and to offer comments. We also conducted four pretests of the 

draft questionnaire, each one using the software environment that actual 

respondents would experience. During the pretest, we observed 

respondents filling out the questionnaire and asked follow-up questions to 

clarify the respondents’ understanding of the questions. On the basis of 

these results, we made modifications as appropriate before finalizing the 

questionnaire. The questionnaire also underwent a peer review by an 

independent survey specialist in our organization. The survey, which was 

implemented as an automated questionnaire on a secure Web site, was 

accessible only to specifically contacted bank officials and could be 

completed using a typical Web browser. However, the questionnaire, 

which contained 51 questions, was also reproduced as an electronic wordprocessing document that could be administered via e-mail, mail, or fax, 

for those respondents who preferred those modes or who could not access 

the Internet. 

Page 47 GAO-07-6 Minority Banks 
Appendix I: Objectives, Scope, and 

Methodology 

We began the survey in late February of 2006 by precontacting banks by 

telephone to verify their status and to obtain the names, titles, and e-mail 

addresses of the president or chief executive officer of the institution, who 

were designated as respondents, or were responsible for delegating the 

survey to another official. Prenotification e-mails were sent in early March 

to verify that the e-mails were valid. The survey was opened and 

respondents were given user names and passwords to their institution’s 

questionnaires on March 14. 

In late March and early April 2006, we sent two reminder e-mails to banks 

that had not yet responded, and began to call nonrespondents after that. 

We also made appeals encouraging responses through the National 

Bankers Association’s (NBA) e-mailings and events. We also made a paper 

copy of the questionnaire that respondents could receive and return via 

mail or fax. In a final set of telephone follow-ups, we gave reluctant 

respondents the opportunity to answer a reduced set of key questions to 

encourage participation. A final reminder e-mail was sent in late April, and 

the survey was closed on April 28. 

Not all surveyed members of the population returned questionnaires or 

answered every question. Two institutions explicitly refused to participate, 

and we were not able to obtain answers from the other 44 nonrespondents 

by the close of this review. This resulted in a response rate of 76 percent, 

calculated as the number of usable questionnaires returned divided by the 

final eligible population. The response rate to any one particular question 

varied, however, as some survey participants declined to provide answers 

to individual questions, and those 4 institutions agreeing to respond only 

to the final telephone follow-up attempt were asked only a limited number 

of key questions. 

Results from this type of survey are subject to several types of errors: 

failure to include all eligible members in the listing of the population, 

measurement errors when administering the questions, nonresponse error 

from failing to collect information on some or all questions from part of 

the surveyed population, and data-processing error. 

To limit the error from failing to list members of the population, we 

compared the regulators’ lists of minority banks and discussed any 

discrepancies with each regulator. In accordance with our request, we 

included any bank considered by at least one regulator to be eligible to 

participate in its efforts. In some cases we surveyed minority banks that 

were not considered by their primary regulator to be minority institutions 

but were considered to have minority status or be eligible for participation 

Page 48 GAO-07-6 Minority Banks 
Appendix I: Objectives, Scope, and 

Methodology 

in another regulator’s efforts. We compared the survey results for 

questions reported on in the text of the report with and without such 

banks to ascertain whether or not the results would have been 

significantly different without including such banks. We found no 

significant differences in the results when the banks not considered 

minority banks by their regulator were included from when such banks 

were excluded. Generally, removing the responses from such banks would 

have changed the results of key questions by 1 or 2 percentage points. In a 

few cases, the inclusion of banks not viewed by their regulators as 

minority institutions changed the survey results by 4 or 5 percentage 

points in a manner more favorable to the regulator. However, the inclusion 

of such banks did not have a material effect on the overall results. 

To limit measurement error, we obtained comments from experts and 

tested the questionnaire with bank officials and attempted to improve the 

questionnaire before finalizing it. 

Although we chose to send our survey to all members of the population 

and not a sample, and thus the survey results are not technically subject to 

sampling error, because only 76 percent of the population provided usable 

responses, bias from nonresponse may result. If the responses of those 

who did not respond would have differed from the responses of those who 

did on some survey questions, the estimates made solely from those who 

did respond would be biased from excluding parts of the population with 

different characteristics or views. To limit this kind of error, we made 

multiple attempts to gain the participation of as many banks as possible. 

To assess the likelihood of significant bias, we compared characteristics 

such as asset size, regulator, and minority type—which may be related to 

the substance of answers to our survey questions—of nonrespondents to 

respondents. We did not detect a significant difference between those who 

chose to respond and those who did not based on these characteristics. To 

further assess the potential extent of nonresponse bias, we compared the 

response rates of the subgroups of those characteristics in our population, 

and determined that response rate did not differ markedly between 

categories of these subgroups, suggesting that banks of certain types were 

not materially more likely to participate or not participate than others. 

Finally, we analyzed the patterns in response between those who 

answered in the earlier part of the fieldwork period and those who 

responded only after repeated follow-up attempts. It is possible that the 

latter group resembles nonrespondents. No significant difference in the 

answers between the groups was detected, which may suggest that actual 

nonrespondents would not have answered in a substantially different way 

from those who did. While the possibility exists that the true results for the 

Page 49 GAO-07-6 Minority Banks 
Appendix I: Objectives, Scope, and 

Methodology 

entire population might be different from those we estimated in our 

report, we feel that on the basis of our analysis, nonresponse bias is 

unlikely. 

To limit data-processing error, a second data analyst independently 

verified analysis programming. In addition, the coding process of 

converting narrative answers into quantitative, categorical data was 

independently assessed to be reliable, and diagnostic checks were 

performed on the survey data to the extent possible. For example, one of 

our checks identified inconsistencies for four questionnaires that 

indicated a primary supervisor which did not match regulator records, 

allowing us to make a correction to responses. We did not otherwise verify 

the substance of respondents’ answers to our questions. 

We conducted our work in Washington, D.C., and New York from 

December 2005 to September 2006 in accordance with generally accepted 

government auditing standards. 

Page 50 GAO-07-6 Minority Banks 
Appendix II: Minority Bank Eligibility Appendix II: Minority Bank Eligibility Criteria Criteria 

Banking regulators use different criteria for determining the types of 

institutions that can participate in their respective minority bank efforts, 

and all regulators maintain lists of minority banks based on these different 

criteria (fig. 11). Some regulators base their definition on Section 308 of 

the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 

(FIRREA), and others base their definition on the criteria in a 1969 

executive order that established the Department of the Treasury’s Minority 

Bank Deposit Program (MBDP). The MBDP is a voluntary program that 

encourages federal agencies, state and local governments, and the private 

sector to use MBDP participants as depositaries and financial agents. 

Participants are certified by Treasury’s Bureau of Financial Management 

Service and included on an annual program roster. 

• FDIC is subject to the “minority depository institution” definition set forth 

in Section 308 of FIRREA but has interpreted ownership by “socially and 

economically disadvantaged individuals” as requiring ownership by 

minorities as defined in Section 308. FDIC does not include women-owned 

banks in its minority bank definition. For stock institutions, FDIC 

determines minority ownership of stock institutions based on the 

proportion of the outstanding voting stock owned by minorities. In 

addition, FDIC has made its program available to public or privately held 

stock institutions and mutuals whose boards of directors and communities 

served are predominantly minority, without regard to the minority status 

of the institution’s ownership or its account holders. 

Page 51 GAO-07-6 Minority Banks 
Appendix II: Minority Bank Eligibility 

Criteria 

Figure 11: Regulators’ Eligibility Criteria for Minority Bank Efforts 

Ownership

More than 51% owned by minorities

Board of directors

Majority of Board are predominantly minority, and

Community serviced

Majority of community served are predominantly minority, 

and

Account holders

Majority of account holders are predominantly minority 

Women

CEO officer is a woman, and

Majority of Board of Directors are women, and

More than 50% of outstanding stock owned by women 

Significant percentage of senior management are 

women, and

Sources: Treasury, FDIC, OTS, OCC, and Federal Reserve.

Not required

Not eligible

Select institutions

All institutions

FDIC 

or 

OCC/

Federal Reserve

public list/Treasury

Mutual S&Ls

Banks and stock

S&Ls, Mutual S&Ls

Banks and stock

S&Ls, Mutual S&Ls

Banks and

stock S&Ls

Banks and

stock S&Lsb

or 

or

OTS

or 

or 

Mutual or publicly

traded institutions

Stock

institutions

Stock

institutions

Mutual or publicly

traded institutions

Mutual or publicly

traded institutions

Mutuals

Mutuals

FIRREA

Mutuals

Mutuals

Mutuals

Private or publicly

traded institutionsa

a

“S&Ls” refers to savings and loans, a term synonymous with “thrift institutions,” which are a type of 

financial institution regulated by OTS. In this report, we include S&Ls or thrifts under the term “banks.” 

Also under this definition, minorities must own or have voting control over more than 50 percent of the 

outstanding stock. 

b

Under FIRREA’s definition, a privately or publicly owned institution is considered minority-owned if 

more than 51 percent is owned by one or more “socially disadvantaged individuals.” 

• OTS is also subject to the “minority depository institution” definition set 

forth in Section 308 of FIRREA. Like FDIC, OTS has interpreted ownership 

by “socially and economically disadvantaged individuals” as requiring 

ownership by minorities as defined in Section 308. OTS also determines 

minority ownership of stock institutions based on the proportion of the 

outstanding voting stock owned by minorities. OTS has also expanded the 

availability of its program to some constituencies that are not eligible for 

FDIC’s program. For example, mutual institutions that have women CEOs 

Page 52 GAO-07-6 Minority Banks 
Appendix II: Minority Bank Eligibility 

Criteria 

and have a majority of women on their boards of directors are eligible to 

participate in OTS’s minority bank efforts. In addition, public stock 

institutions and mutuals (but not private stock institutions) whose boards 

of directors, communities served, and account holders are predominantly 

minority, may participate in OTS’s efforts regardless of the minority status 

of the institution’s ownership. 

• Treasury’s criteria—on which OCC and the Federal Reserve base their 

criteria—differ from those of Section 308 of FIRREA, FDIC, and OTS in 

several ways. In the first instance, the MBDP program is available to both 

minority- and women-owned banks, stock savings and loans, and mutual 

savings and loans. In order to be included on Treasury’s MBDP roster as a 

minority-owned bank or stock savings and loans, more than 50 percent of 

an institution’s outstanding stock must be either owned or controlled for 

voting purposes by individuals of minority groups. A mutual savings and 

loan may qualify as minority-owned if a majority of the institution’s board 

of directors are members of minority groups. To qualify as a womenowned bank or stock savings and loans, more than 50 percent of the 

institution’s outstanding stock must be owned by women and a significant 

percentage of senior management positions must be held by women. A 

women-owned mutual savings and loan is eligible for the MBDP if a 

majority of its board of directors are women and a significant percentage 

of senior management positions are held by women. 

• The OCC’s definition is consistent with that established by Treasury’s 

MBDP criteria. OCC is not covered by Section 308 of FIRREA. 

• The Federal Reserve also bases its definition on Treasury’s MBDP criteria. 

However, the Division of Supervision of the Federal Reserve also compiles 

an internal list of minority banks that is based on Section 308 FIRREA 

criteria. 

We identified several discrepancies in the regulators’ lists of minority 

banks. These banks were all listed as minority banks by one regulator but 

not by another. When we spoke to officials from each of the agencies, they 

told us that these discrepancies were due to differences in criteria for 

minority banks. For example, five of these discrepancies were the result of 

FDIC’s exclusion of women-owned banks—women-owned banks cannot 

participate in FDIC’s programs, but they can participate in the MBDP 

program. Another discrepancy resulted from a bank’s primary regulator 

excluding a certain ethnicity (not named in FIRREA), while another 

regulator included it. 

Page 53 GAO-07-6 Minority Banks 
Appendix III: Selected Survey Results Appendix III: Selected Survey Results 

This appendix provides the number of minority banks that responded to 

each survey question discussed in the report body by response category. 

Table 5: How good or poor are these efforts for supporting minority-owned financial 

institutions? 

FDIC Federal Reserve OCC OTS Total

Very good/good 35 5 8 4 52

Fair 17 8 8 5 38

Poor/very poor 6 2 6 5 19

Don’t know 19 2 11 4 36

Total 77 17 33 18 145

Source: GAO. 

Table 6: Has your primary regulator made your institution aware of any of the 

technical assistance it offers in the past 3 years? 

FDIC Federal Reserve OCC OTS Total

Yes 50 6 9 8 73

No 20 10 15 8 53

Don’t know/No answer 10 1 8 1 20

Total 80 17 32 17 146

Source: GAO. 

Table 7: Has your institution used any technical assistance offered by your primary 

regulator in the past 3 years? 

FDIC Federal Reserve OCC OTS Total

Yes 23 4 9 5 41

No 48 10 23 11 92

Don’t know 7 2 0 2 11

Total 78 16 32 18 144

Source: GAO. 

Page 54 GAO-07-6 Minority Banks 
Appendix III: Selected Survey Results 

Table 8: (If used) How useful or not useful do you think your primary regulator’s 

technical assistance is? 

Total

Extremely/very useful 33

Moderately useful 5

Slightly/not at all useful 3

Total 41

Source: GAO. 

Table 9: Are you aware or unaware whether FDIC or any other regulator has held 

roundtables and/or conferences for minority-owned financial institutions in the past 

3 years, and if so, have you attended any? (Below are responses concerning FDIC 

roundtables and/or conferences.) 

FDIC Federal Reserve OCC OTS Total

Unaware 14 3 15 1 33

Aware, and attended 40 7 9 9 65

Aware, NOT attended 24 8 7 7 46

No answer 1 0 0 1 2

Total 79 18 31 18 146

Source: GAO. 

Table 10: (If attended) How useful or not useful do you think these minority 

institution roundtables and conferences are? (Below are responses for FDIC 

roundtables and/or conferences.) 

FDIC Federal Reserve OCC OTS Total

Extremely/very useful 20 4 6 3 33

Moderately useful 10 3 3 4 20

Slightly/not at all useful 9 0 0 2 11

Don’t know 1 0 0 0 1

Total 40 7 9 9 65

Source: GAO. 

Page 55 GAO-07-6 Minority Banks 
Appendix III: Selected Survey Results 

Table 11: Has your institution participated in training or education programs offered 

by your primary regulator or other regulators in the past 3 years? (Below are 

responses for the bank’s primary regulator’s training and educational programs.) 

Total

Yes 83

No 53

Don’t know 6

Total 142

Source: GAO. 

Table 12: (If attended) How useful or not useful do you think these training and 

educational programs are? (Below are responses for the bank’s primary regulator’s 

training and educational programs.) 

FDIC Federal Reserve OCC OTS Total

Extremely/very useful 37 9 14 1 61

Moderately useful 6 3 2 1 12

Slightly useful 2 0 0 3 5

Don’t know 0 0 2 0 2

Total 45 12 18 5 80

Source: GAO. 

Table 13: How good or poor of a job do you think your regulator does in 

administering examinations? 

Total

Very good/good 118

Fair 18

Poor/very poor 5

Don’t know 4

Total 145

Source: GAO. 

Page 56 GAO-07-6 Minority Banks 
Appendix III: Selected Survey Results 

Table 14: Overall, how good or poor is your relationship with your primary 

regulator? 

Total

Very good/good 128

Fair 11

Poor/very poor 5

Don’t know 1

Total 145

Source: GAO. 

Table 15: To what extent do you feel this provision of CRA has encouraged other 

insured depository institutions to make investments in your institution or undertake 

loan participations or other ventures with your institution? 

Total

Very great/great extent 21

Moderate extent 28

Some/little or no extent 60

Don’t know 5

Total 114

Source: GAO. 

Table 16: How would you rate your institution’s current financial outlook compared 

with the past 3 to 5 years? 

Total

Much/slightly better 94

About the same 30

Slightly/much worse 16

Don’t know 4

Total 144

Source: GAO. 

Page 57 GAO-07-6 Minority Banks 
Appendix III: Selected Survey Results 

Table 17: What suggestions, if any, do you have for improving existing federal 

banking regulators’ efforts to support minority-owned financial institutions, or 

suggestions for creating new programs or policies in that area? 

Total

More understanding of/sensitivity to minority banks’ uniqueness 24

Improved communication on issues/programs relevant to minority banks, 

provide financial data on minority banks 16

More guidance, specific technical assistance, training on minority banks 

issues 12

Other 8

Reduce regulatory burden, examine well-performing minority banks less 

frequently 7

Facilitate, encourage Community Reinvestment Act (CRA) investments and 

partnerships between institutions and minority banks 5

Continued training/providing updated general information 4

Uniformity/centralization of minority bank programs across regulators 4

More/improved deposit programs 4

Increase accountability, oversight of regulators 3

Not applicable 26

Total number of comments 113

Source: GAO.

Page 58 GAO-07-6 Minority Banks 
Appendix IV: Comments from the Federal Appendix IV: Comments from the Federal Deposit Insurance Corporation 

Deposit Insurance Corporation 

Page 59 GAO-07-6 Minority Banks 
Appendix IV: Comments from the Federal 

Deposit Insurance Corporation 

Page 60 GAO-07-6 Minority Banks 
Appendix V: Comments from the Office of Appendix V: Comments from the Office of Thrift Supervision 

Thrift Supervision 

Page 61 GAO-07-6 Minority Banks 
Appendix V: Comments from the Office of 

Thrift Supervision 

Page 62 GAO-07-6 Minority Banks 
Appendix VI: Comments from the Comptroller Appendix VI: Comments from the of the Currency 

Comptroller of the Currency 

Page 63 GAO-07-6 Minority Banks 
Appendix VI: Comments from the Comptroller 

of the Currency 

Page 64 GAO-07-6 Minority Banks 
Appendix VII: Comments from the Board of Appendix VII: Comments from the Board of Governors of the Federal Reserve System 

Governors of the Federal Reserve System 

Page 65 GAO-07-6 Minority Banks 
Appendix VII: Comments from the Board of 

Governors of the Federal Reserve System 

Page 66 GAO-07-6 Minority Banks 
Appendix VII: Comments from the Board of 

Governors of the Federal Reserve System 

Page 67 GAO-07-6 Minority Banks 
Appendix VIII: GAO Contact and Staff Appendix VIII: GAO Contact and Staff Acknowledgments 

Acknowledgments 

George A. Scott (202) 512-7215 or scottg@gao.gov GAO Contact 

In addition to the contact named above, Wesley M. Phillips, Assistant 

Director; Allison Abrams; Anna Bonelli; Stefanie Bzdusek; Emily 

Chalmers; Catherine Hurley; Marc Molino; Carl Ramirez; and Omyra 

Ramsingh made significant contributions to this report. 

Acknowledgments 

(250269) Page 68 GAO-07-6 Minority Banks 
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