The Federal Deposit Insurance Corp. is spearheading an effort to match private investors with minority-owned banks and community development financial institutions that need capital.
The agency on Thursday announced the launch of the Mission-Driven Bank Fund. Truist Financial and Microsoft will lead the new fund as anchor investors, and a contribution from Discovery Inc. pushed the initial funding to $120 million. The FDIC expects additional commitments.
The 280 certified minority depository institutions and CDFIs will be eligible to seek investments, pitching their ideas to fund managers on how they would use the funds, the FDIC said.
“We would love to see other companies and philanthropic institutions also invest,” FDIC Chair Jelena McWilliams said on a conference call with reporters. “I won’t say we’re going on a road show, but we’re certainly going to be promoting the fund in hopes it attracts additional investors and the overall amount pledged to the fund increases exponentially.”
The FDIC organized the fund and will act in an advisory role, but the agency “will not make funding decisions or investment decisions,” McWilliams said.
“Because of our role as a bank regulatory and supervisor it will be managed by a private-sector fund manager on behalf of the investors,” she added.
Fund investments are intended to support a wide range of development activity in underserved communities, including mortgage and small-business lending along with commercial real estate and construction, McWilliams said. “Its going to be really open to whatever is going to make a significant impact in low-and moderate-income communities and communities of color.”
McWilliams recalled that her inspiration for developing an investment vehicle for banks to compete for funds was an episode of "Shark Tank," the TV show in which entrepreneurs present their ideas to “sharks” — a cadre of well-known figures in the business world — to attract capital.
“As I watched businesses pitch their ideas to the sharks, to the investors, I thought, why not have [something similar] for minority banks,” McWilliams said.
Before the FDIC could start the fund, it had to make sure it was on solid legal ground to be involved with such an effort.
“It took a while to understand under our statutory mandates how we can do this, but here we are today unveiling the Mission-Driven Bank Fund as a capital investment vehicle developed by the FDIC,” McWilliams said. But that vehicle “is going to be wholly privately owned and run.”
The individual infusions by Truist, Microsoft and Discovery were not disclosed.
The $522 billion-asset Truist “has an established history of partnering” with CDFI and MDI institutions, CEO William Rogers said in a press release. “We’re extending this commitment through an innovative approach to capital investments, and we believe this will significantly enhance these institutions’ ability to provide positive outcomes.”
