BMO Financial Group has reached a $40 billion agreement with U.S. community groups, which could help push its pending acquisition of Bank of the West over the finish line.
Under the five-year deal, announced Monday, the Canadian banking giant promised to boost its mortgage lending to lower-income and minority homeowners, increase its small business lending in underserved communities and make other community development investments.
The company's U.S. subsidiary, Chicago-based BMO Harris Bank, also vowed to keep open all of Bank of the West's branches. BMO Harris plans to add five new branches in underserved communities in California, where Bank of the West is based.
"We have a duty to continue addressing the barriers that disproportionately affect people of color and remain committed to creating more opportunities that achieve progress for all," David Casper, the U.S. CEO of BMO Financial Group, said in a news release. The bank is "committed to ongoing community engagement to realize the full potential of this plan," he added.
The deal is a "substantial move in the right direction by addressing racial equity and access to capital in specific and tangible ways that will create more economic inclusion," Jesse Van Tol, president and CEO of the National Community Reinvestment Coalition, said in the release.
The announcement comes as Bank of Montreal's parent company tries to meet its year-end target for closing the Bank of the West acquisition, which is still awaiting full regulatory approval. In July, the Federal Reserve Board and the Office of the Comptroller of the Currency
A large chunk of the community benefits agreement focuses on boosting BMO's mortgage lending to lower-income and minority borrowers. The company is doubling its number of bankers who focus on that customer segment, expanding a low-down-payment product, creating a Native Community Housing Fund to improve lending in tribal lands and expanding its financial literacy programs to support homeownership.
The bank also agreed to expand its small business lending to minority-led and women-led firms and to support community development financial institutions, which focus on underserved communities. And it set aside $325 million for special-purpose credit programs focused on mortgage and small business lending for women and communities of color.
In addition, BMO pledged to improve the diversity of its U.S. senior leadership ranks. The bank set a 30% target for people of color and a 40% to 60% range for women, though it did not provide a timeframe for reaching those goals.
The NCRC said the agreement marks the 25th such deal it has facilitated. The BMO pact is
Other large community benefits agreements that the NCRC has reached in recent years include a $60 billion deal in connection with the merger that formed Truist Financial and a $40 billion deal with Huntington Bancshares following its acquisition of TCF Financial.
The NCRC said the BMO agreement grew out of input from more than 85 community groups. Groups that were part of the announcement included Northwest Indiana Community Action, United South Broadway Corp. in New Mexico and Universal Housing Solutions CDC in Chicago.
