Incubating Inner-City Branches for Acquisition by Financial Institutions

Given the current aversion for risks by banks, opening new branches in Low and Middle Income (LMI) neighborhoods does not constitute a priority. Despite the shrinking number of community banks and of local banks, this report relies on the premise that these banks are more adequate at bringing customers with banking services to open a bank account. However, regulatory hurdles impede the way to this outcome.

This report analyzes options to enable the creation of an ideal institution to meet this goal. The project demonstrates that LMI neighborhoods can be viable places to invest in either for profitability or community development purposes. Inhabitants of these areas are willing to see megabanks join the neighborhood.

Starting by laying the details of the regulatory environment in the banking industry and analyzing the changes in the CRA requirements after the 2007 financial crisis, this report shall conclude that despite the decline in interest in CRA projects, presenting the creation of a new financial entity as a business opportunity can be a viable project.