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The city writes a new list of approved banks every two years and the recent crisis in banking led officials to take new factors into account, such as how many of an applicant’s deposits are uninsured and how many unrealized losses lurk in its investment portfolio. Members of the public were invited for the first time to comment on the city’s banking decisions at a public hearing today, a level of scrutiny that made some lenders uncomfortable.
“This would be an opportunity for some of our banking partners to talk about the wonderful things that they’re doing in our communities,” city Treasurer Mary Christine Jackman told Clare Cusack, CEO of the New York Bankers Association, at a banking commission hearing in February.
“I was just a little confused,” Cusack replied. “This is all based on the ability of banks to hold money safely and soundly.”
“Exactly,” Jackman said. “We recognize that there’s business practices that people don’t understand.”
Concerns about the business practices of certain banks, combined with worries that the federal government will fully backstop deposits, has resulted in commercial banks losing $600 billion in deposits so far this year, or 3% of the total, according to Federal Reserve data. Declines have been most pronounced at small and midsize banks.
Van Saun of Citizens Bank said deposit balances may continue to decline gradually because the higher interest rates set by the Fed effectively remove money from the financial system.
Facing that powerful headwind, banks seemed inclined to jump through whatever hoops were necessary to get a piece of New York’s municipal deposits, a vast sum in a city whose annual budget exceeds $100 billion. A record 28 institutions applied to get on the list approved by the banking commission, which consists of the mayor, city comptroller and finance commissioner.
Piermont Bank was the only small institution that didn’t seek to renew its status as a “designated bank.” Piermont declined to comment publicly on its decision.
Wells Fargo was one of 26 banks approved today, even though last year the city said it wouldn’t open new depository accounts after Bloomberg News reported the bank rejected over half of Black applicants seeking to refinance their homes in 2020, while approving 72% of white applicants. In 2017 Wells was booted off the list for four years after the scandal involving the creation of sham accounts. City Comptroller Brad Lander said he voted against approving Wells.
Two additional applicants, Capital One and KeyBank, were permitted to continue existing contracts for a year but the city froze deposits because the banks failed to provide required anti-discrimination policies, Lander said.
In a statement, Capital One said it prohibits discrimination and harassment against any applicant, intern, associate, vendor, contractor, customer, or client on the basis of protected characteristics.
“Our 2023 submission is largely consistent with what we submitted to the city of New York in previous years,” the bank said.
KeyBank said: “KeyBank does not discriminate in any of its operations, including lending, hiring, and branch closures. We understood that we had provided the required certifications and information to the Banking Commission as part of the application process, including certifications and policies related to nondiscrimination. We believe this is a misunderstanding and we look forward to clarifying this issue with the Banking Commission.”
The list of approved banks:
Amalgamated Bank
Bank of America
Bank of New York Mellon
BankUnited
Capital One
Citibank
Citizens Bank
ConnectOne Bank
Dime Community Bank
Flushing Bank
Habib American Bank
International Finance Bank
Israel Discount Bank
JPMorgan Chase
KeyBank
Modern Bank
M&T Bank
New York Community Bank
PNC Bank
Popular Bank
Santander Bank
Spring Bank
State Street Bank
TD Bank
US Bank
Valley National Bank
Webster Bank
Wells Fargo
