The Minneapolis City Council recently approved changes to the city’s “responsible banking ordinance” that will now require financial institutions to publicly disclose information about certain lending practices and policies they make with the city each year.
The ordinance applies to businesses that provide banking services to the city. That includes financial institutions that make home mortgage, small business, home improvement, or rehabilitation loans of any type for city programs.
The expansion is an attempt to create greater transparency into how those institutions handle public dollars. The city said it wants to ensure that the businesses are fulfilling certain obligations to serve the needs of the communities and neighborhoods in which the services are provided.
The ordinance defines “financial institutions” to include any commercial bank, savings bank, savings and loan association, building and loan association, mutual savings bank, mortgage banker, investment bank, or credit union. Two of the largest banks that will be affected by the change are San Francisco-based Wells Fargo and Minneapolis-based U.S. Bank.
Every year, by July 1, those institutions that provide banking services to the city, are now required to publicly share information on loan modifications and foreclosures on residential mortgages on properties located within the city, as well as the quantity and value of loans given to small businesses, among other data.
According to Elizabeth Glidden, a city councilmember and lead author of the ordinance change, Minneapolis is going to be the 10th city to adopt a similar policy. It follows cities like Seattle, New York, Cleveland, and Boston.
“We’re part of a growing trend, and we’re at the front end of it across the country,” Glidden told Twin Cities Business
. “This is an attempt to be more transparent and clear with the public as to what’s being exchanged between these institutions and the city.”
In addition to the loan-modification and foreclosure data, commercial banks that provide banking services to the city will also be required to file a Community Reinvestment Plan every two years, which describes current and proposed initiatives to address the financial needs of the city, its residents, and its businesses.
“We used to get a lot of the commercial banks’ plans for the community informally in the past,” said Glidden. “But this reinvestment plan will allow commercial banks to address their plans in a more formalized and consistent format.”
The city also said in a statement that the new disclosures will help Minneapolis leaders in choosing financial service providers for future projects.
According to the city, Wells Fargo played a role in helping develop the ordinance changes.
“Wells Fargo did help guide us, but that doesn’t mean they were happy with the changes,” said Glidden. “No one ever says, ‘Please regulate us more,’ but we think we would have heard from them if we had gone too far.”
Wells Fargo spokeswoman Peggy Gunn said the bank finds the ordinance somewhat challenging but believes it won’t have a problem complying with it.
“Our concern was around the importance of not making the ordinance so complex, costly, or having regulatory burdens—which would make it ineffective for financial institutions to participate in the city lending program,” said Gunn. “But we provided feedback to the city on the ordinance and we support the final version.”
In addition to Wells Fargo, Jewish Community Action—a nonprofit group that promotes social economic justice—also worked with elected officials to help develop the new policy.
Carin Mrotz, the director of operations and communications for Jewish Community Action, said that the city is heading in the right direction, but she thinks it could still go further.
“We’ve been working on community reinvestment for over a decade,” said Mrotz. “And while this is a big step forward, we think the language could still be clearer and stronger about how the financial institutions engage the community after the data is collected.”