Good morning. I am thrilled that so many have been able to join us today. By our latest count, nearly 2,600 people registered to attend this event … and we are not even offering free snacks.
While I am pleased that so many have joined us this morning, I am not surprised. The issue of advancing diversity and inclusion across financial services cannot – and must not – be taken lightly.
One of my earliest goals as Chairman was to advance diversity and financial inclusion. This mission is not merely academic or theoretical for me; it is personal. Some of you have heard me speak about my humble background growing up on the wrong side of the Iron Curtain and even more humble beginning in the United States after I arrived by myself on my 18th birthday with $500.1
I will not repeat that story here but suffice it to say that, although it would be easy to look at me today through the lens of the office I now hold [at least for another 15 days] and assume that I must “belong,” I know what not belonging feels like in our society. I understand the perspective of those who cannot make ends meet despite holding multiple jobs, who cannot qualify for credit, who watch their checking account balance with daily trepidation, who ration heat in the winter to lower utility bills.
When you have to do all that and still barely survive, it is hard to feel that you belong. You feel disenfranchised instead. The prolonged pandemic has exacerbated the living circumstances of those who already felt like they did not belong or that the system was not working for them.
Now, the FDIC has historically been a quiet banking regulator and not the venue most people think of for groundbreaking work on these topics. When I became FDIC Chairman, I considered it my moral obligation to change the status quo on these critical issues, both internally and externally.
It should come as no surprise, therefore, that I have placed heavy emphasis on financial inclusion, and specifically on the question of how we can make all Americans, especially our most vulnerable communities, feel that our financial system is working for them. As I quickly learned on the job, the good, old mold was no longer good, and changing the system would require serious thinking outside the box.
I. Innovation as a Bridge to Financial Inclusion
Throughout my tenure, I have remained steadfast in my belief that the best way to create an inclusive banking system is to move relentlessly forward in fostering innovation. Innovation has not only made financial markets more efficient,2 it has democratized finance. Financial innovation has increased access to products and services, lowered their cost, and expanded the pool of creditworthy consumers.3
Since I was a young immigrant visiting a bank branch to open my first account, the paradigm has shifted entirely. Today almost every adult is equipped with a smart phone and the ability to access thousands of financial services providers with a few taps. Not being limited by the time and cost of transportation to access financial services can be life changing for the consumers who need it most.
Our office of innovation – FDITECH – recently brought together a diverse set of stakeholders in a tech sprint designed as a public challenge to banks, non-profits, private companies, and others to help us identify ways community banks can meet the needs of the unbanked in a cost-effective manner.4 The solutions presented by the selected teams will be a step forward to address these complex issues.5
Reexamining Impediments to Employment
Thinking outside the box to support financial inclusion also requires us to assess where our rules may cause impediments in other ways. For example, Section 19 of the Federal Deposit Insurance Act (FDI Act) prohibits persons convicted of certain types of crimes from working at a bank. We took a fresh look at our policy implementing Section 19 and changed it to enable more individuals to work for banks.6
We now exclude all offenses that have been expunged or sealed – rather than only certain types of expungements – from the scope of Section 19. We allow a person with two, rather than one, minor de minimis crimes on a criminal record to qualify for the exception.
We no longer impose a five-year waiting period following a first de minimis conviction; instead, we have established a three-year waiting period following a second de minimis conviction, and no waiting period following a first de minimis conviction. We increased the threshold for small-dollar, simple thefts from $500 to $1,000.
We expanded the de minimis exception for crimes involving the use of fake identification to circumvent age-based restrictions from only alcohol-related crimes to any such crimes related to purchases, activities, or premises entry. These changes have a major impact on individuals who no longer need to obtain written consent from the FDIC in order to work for a bank.
Collaborating with Mission-driven Banks
It did not take me long on the job to learn that the nation’s minority-depository institutions (MDIs) are the financial lifeblood of the communities they serve, enabling individuals and minority-owned small businesses to securely build savings and obtain credit.7
The FDIC has embraced our statutory responsibility to promote and preserve the health of MDIs by seeking new and innovative ways to engage with these institutions and better understand their needs.8 In addition to frequently engaging with MDIs throughout the nation with technical assistance, banker roundtables, and networking events to connect MDIs and non-MDIs for potential business partnerships, we also:
- Increased MDI representation on our Community Bank Advisory Committee (CBAC);9
- Established a new MDI advisory subcommittee to highlight the work of MDIs in their communities and to provide a platform for MDIs to exchange best practices;10
- Enabled MDIs to review potential purchases of a failing MDI before non-MDI institutions are given this opportunity;11
- Clarified that non-MDIs can receive Community Reinvestment Act credit for their collaboration with MDIs;12 and
- Established the Office of Minority and Community Development Banking to support the agency’s ongoing strategic and direct engagement with MDIs, community development financial institutions (CDFIs), and other mission-driven banks.13
Now, when you have the weight of a venerable federal regulatory agency behind you, it is easy to assume that you know what is best for our regulated entities. It was critical for me not to assume that I intrinsically understood what MDIs need.
Back in 2018, I reached out to a number of MDI CEOs – several of whom are National Bankers Association (NBA) members – and said, “Teach me. Teach me what your communities need, teach me about your business model, and tell me what a regulatory agency like the FDIC can do to help you help your communities.” Each of those CEOs obliged. To them, I owe immense gratitude … not only because they were patient with me poking and probing and asking difficult questions but also because I was thirsty for knowledge and they allowed me to drink from the well.
What I learned drinking from the well is that the MDIs – especially African-American and Hispanic MDIs – are in dire need of capital. When you get armed with that kind of knowledge, if you are a good person, you must execute on it. I challenged the FDIC to come up with a framework that would allow these banks access to capital.
It took two years, but last September, we launched The Mission-Driven Bank Fund,14 a collaborative investment framework to drive capital investment and other funding to FDIC-insured MDIs and CDFIs that support low- and moderate-income, minority, and rural communities, enabling them to build size, scale, and capacity to in turn allow them to:
- Provide affordable financial products and services to individuals and businesses;
- Stimulate economic and community development; and
- Build opportunity and prosperity.
In designing the framework of the fund, the FDIC engaged approximately 70 Chief Executive Officers of MDIs and CDFIs and their trade groups as well as potential investors, investment consultants, and philanthropic organizations. We are pleased that Microsoft and Truist Financial Corporation are the anchor investors in the fund, and Discovery, Inc. is a founding investor. Combined, these investors are pledging $120 million to support these mission-driven banks.
Financial Institution Diversity Program
The FDIC also encouraged financial institutions to voluntarily conduct a diversity self-assessment and share results with our Office of Minority and Women Inclusion. During my tenure, we released an automated form which was designed to make the process more user-friendly and more secure.
We did not stop there. In 2021, we partnered with the Ohio Bankers League and other federal agencies to educate a diverse pool of candidates who aspire to serve on bank boards. Within six months of the event, three attendees were added to Ohio bank boards and an additional eight are in the works.
Notwithstanding this progress to close longstanding gaps, we know more needs to be done. These collective actions have caused a structural and cultural shift in the way the FDIC approaches these issues and I expect these efforts to continue long after my last day [did I mention I have 15 days left?]. There is simply no going back to the old ways.
II. Diversity, Equity, and Inclusion at the FDIC
Now, if English is not your first language, you know that proverbs are one of the most difficult aspects of English language to grasp for a non-native speaker. Over the years, I skillfully crafted my own: “not the sharpest tool in the drawer” … “the hair that broke the camel’s back” … “where the tire hits the road” … to name a few.
A couple of proverbs come to mind when I think of diversity and inclusion: “those who live in glass houses should not throw stones” … “sweep your own porch first” [my friend Google made sure these are correct.]
Creating a Workplace of Belonging
Shortly after I became Chairman, I realized that it was long overdue for the FDIC to take a hard and honest look at itself on the very issues of diversity, equity, inclusion, and accessibility (DEIA). I wanted to understand how FDIC employees felt: did they feel as if they belonged in this agency?
The best way for me to find out was to hear it directly from the people, and hearing it directly from people took some effort. On numerous occasions, I took my lunch tray at the cafeteria, sat down with employees on their break, and asked about their experiences.
Instead of driving to our Washington headquarters, I drove to our Arlington facility, boarded the FDIC shuttle to the D.C. building, and talked to the employees on the shuttle about their experiences. When I received emails from employees expressing their concerns, I immediately reached out either directly or through my Chief of Staff and asked how we can help.
Three things were important to me: I wanted our employees to understand that they were being heard; that their input was valued; and that the agency’s top management cared. I tasked senior management with making a concerted effort to think outside the box to address FDIC’s longstanding DEIA issues.
While more work remains to be done, I am pleased with the significant progress the FDIC has made with regard to DEIA since 2018, as we:
- Established a team to improve the way we recruit, hire, and onboard examiners;15
- Established an executive-level task force to promote a diverse and inclusive examination workforce;16
- Sought to reduce possible barriers to racial, ethnic, and gender diversity of the FDIC workforce by hiring an independent consultant to conduct a barrier analysis;17
- Reversed a decade-long trend by hiring minorities into the bank examiner workforce at a rate several points higher than the civilian labor force;18
- Increased minority representation across the FDIC workforce, which as of September 30, 2021 included 32 percent minorities, 44 percent women, and 14 percent individuals with disabilities;19 and almost 13 percent of new FDIC hires in fiscal year 2021 were veterans;20
- Increased diversity across leadership: minorities now hold 25 percent of the management-level positions at the FDIC, and women hold 41 percent;21
- Reduced travel for onsite bank examinations and mandatory training, often cited as a challenge to attracting and retaining a diverse workforce;22
- Provided paid parental leave23 and supported student loan repayment programs;24
- Increased our recruitment efforts by partnering with minority-serving institutions such as historically black colleges and universities;25
- Partnered with the Hispanic Association of Colleges & Universities to raise awareness about Hispanic Serving Institutions (HSI) in the FDIC’s first-ever recognition of HSI Week;26
- Launched the agency’s first-ever program to support first generation professionals in the workplace;
- Launched two new programs to develop the next generation of leaders with a corporate-succession management focus to increase DEIA in the FDIC’s leadership;27 and
- Revised pay-setting principles for new hires to address inequities in the legacy system, and conducted a “pay adjustment program” to ensure that current employees were paid consistent with these principles.28
In 2021, we released our three-year Diversity, Equity, and Inclusion Strategic Plan (Strategic Plan).29 The Strategic Plan established diversity, equity, inclusion, and accessibility as an organizational priority and established for the first time in FDIC’s history DEIA as a corporate goal. The Strategic Plan provides actionable steps and a clear map forward for the agency.
FDIC Supplier Diversity
In addition to increasing the diversity of our workforce, we have also promoted the participation of minority- and women-owned businesses (MWOBs), law firms, and investors. In 2021, the FDIC awarded $846 million in new contracts, with almost half being awarded to MWOBs.30 The FDIC paid almost $3.6 million to minority-owned law firms and diverse attorneys, representing over 18 percent of contracted legal services.31
Although we have made progress, there are plans to do more. I am pleased to announce that this week the FDIC and John Hope Bryant’s Operation Hope signed a collaboration arrangement to promote financial education using the FDIC’s Money Smart curriculum, educate MWOBs on how to do business with the FDIC, and increase consumer access to affordable credit.
Back in 2018, I vowed that until my last day on the job, I would fight to make the financial system work for all Americans. Now that I have 15 days left in my tenure, as I reflect upon the state of the FDIC workforce that I encountered in 2018 and compare it to today, I am incredibly grateful for the monumental improvements we have made to “sweep our porch.”
None of those accomplishments would have been possible without every single employee at the FDIC rowing in the same direction – that of willfully improving ourselves and making the FDIC an agency where all can belong. And I could not be more proud of our efforts over the past three-and-a-half years to make our financial system better and more inclusive.
I am incredibly grateful to the NBA. Without NBA’s guidance, support and direction, we would have missed many of the important achievements along the way.
To NBA and your members, godspeed. I will cheer you from the sidelines as you continue to accomplish the impossible, and I know the FDIC will be rowing alongside you.
1 See FDIC Chairman Jelena McWilliams, “Creating A Financial System of Inclusion and Belonging,” speech before the University of Chicago School of Law and the American Financial Exchange Webinar (Aug. 26, 2020) available at www.fdic.gov/news/speeches/2020/spaug2620.html.
2 Keynote Remarks by FDIC Chairman Jelena McWilliams on the "The Future of Banking" at The Federal Reserve Bank of St. Louis; St. Louis, Missouri (Oct. 1, 2019), available at https://www.fdic.gov/news/speeches/2019/spoct0119.html.
3 Remarks by FDIC Chairman Jelena McWilliams at Money 20/20 (Oct. 27, 2021), available at https://www.fdic.gov/news/speeches/2021/spoct2521.html .
4 See FDIC, FDITECH Launches Tech Sprint to Reach More Unbanked People, FIL-43-2021 (June 16, 2021), available at https://www.fdic.gov/news/financial-institution-letters/2021/fil21043.html.
5 See FDIC, FDITECH Selects Eight Teams in Tech Sprint to Reach the Unbanked (Aug. 12, 2021), available at https://www.fdic.gov/news/press-releases/2021/pr21071.html; FDIC, FDITECH Selects Three Winning Teams in Tech Sprint to Reach the Unbanked (Sept. 13, 2021), available at https://www.fdic.gov/news/press-releases/2021/pr21085.html.
6 Statement by FDIC Chairman Jelena McWilliams on Final Rule: Section 19 of the FDI Act (July 24, 2020), available at https://www.fdic.gov/news/speeches/2020/spjul2420.html .
7 See, e.g., James Barth, Aron Betru, Matthew Brigida, and Christopher Lee, Minority-Owned Depository Institutions: A Market Overview, Milken Institute (July 2018), available at https://milkeninstitute.org/sites/default/files/reports-pdf/MDIs-A-Market-Overview.2018.FINAL.pdf.
8 Section 308 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) sets forth several statutory goals for the FDIC and other financial regulators, including the following: (1) preserve the number of MDIs; (2) preserve the minority character in cases involving merger or acquisition of an MDI; (3) provide technical assistance to prevent insolvency of institutions not now insolvent; (4) promote and encourage creation of new MDIs; and (5) provide for training, technical assistance, and educational programs.
10 See MDI Subcommittee to FDIC's Advisory Committee on Community Banking, available at https://www.fdic.gov/regulations/resources/minority/subcommittee/index.html.
11 See Statement of Policy Regarding Minority Depository Institutions, 86 Fed. Reg. 32728 (June 23, 2021), available at www.fdic.gov/news/board-matters/2021/2021-06-15-notice-sum-b-fr.pdf .
12 See Statement of Betty J. Rudolph, National Director, Minority and Community Development Banking, Federal Deposit Insurance Company, “An Examination of Regulators’ Efforts to Preserve and Promote Minority Depository Institutions,” before the Subcommittee on Consumer Protection and Financial Inclusion of the Committee on Financial Services, U.S. House of Representatives (Nov. 20, 2019), available at https://www.fdic.gov/news/speeches/2019/spnov2019.html.
13 FDIC Creates New Office of Minority and Community Development Banking to Support Mission-Driven Banks (Nov. 2, 2021), available at https://fdic.gov/news/press-releases/2021/pr21093.html.
14 FDIC Launches Mission-Driven Bank Fund (Sept. 16, 2021), available at https://www.fdic.gov/news/press-releases/2021/pr21086.html .
15 See Statement of Nikita Pearson, Acting Director, Office of Minority and Women Inclusion, Federal Deposit Insurance Corporation, “Holding Financial Regulators Accountable for Diversity and Inclusion: Perspectives from the Offices of Minority and Women Inclusion,” before the Subcommittee on Diversity and Inclusion of the Committee on Financial Services, U.S. House of Representatives (Sept. 8, 2020), available at https://www.fdic.gov/news/speeches/2020/spsep0820.html.
16 Id.; see also FDIC, Office of Minority and Women Inclusion, “Section 342, Dodd-Frank Wall Street Reform and Consumer Protection Act Report to Congress 2020” (March 31, 2021), available at www.fdic.gov/about/diversity/pdf/rtc-3-31-21.pdf.
18 See Statement of Nikita Pearson before the Subcommittee on Diversity and Inclusion of the Committee on Financial Services, U.S. House of Representatives (Sept. 8, 2020), supra note 15.
19 Internal FDIC data (as of Sept. 30, 2021); for year-end data for 2021, seeforthcoming in FDIC Annual Report 2021.
20 FDIC, Office of Minority and Women Inclusion, Disabled Veterans Affirmative Action Program Fiscal Year 2021 Accomplishment Report (Dec. 1, 2021), https://www.fdic.gov/about/diversity/pdf/dvaapfy2021fy2022.pdf.
21 Internal FDIC data (as of Sept. 30, 2021).
22 See FDIC, “Section 342, Dodd-Frank Wall Street Reform and Consumer Protection Act Report to Congress 2020,” supra note 16.
23 See “FDIC Announces New Paid Parental Leave Benefit for Employees,” October 9, 2019, available at https://www.fdic.gov/news/press-releases/2019/pr19089.html.
24 See FDIC, “Section 342, Dodd-Frank Wall Street Reform and Consumer Protection Act Report to Congress 2020,” supra note 16.
26 See Twitter, @FDIC.gov (Sept. 13, 2021).
27 See FDIC, Office of Minority and Women Inclusion, Disabled Veterans Affirmative Action Program Fiscal Year 2021 Accomplishment Report, supra note 20.
28 See FDIC, “Section 342, Dodd-Frank Wall Street Reform and Consumer Protection Act Report to Congress 2020,” supra note 16.
29 See FDIC, 2021-2023 Diversity, Equity, and Inclusion Strategic Plan, available at https://www.fdic.gov/about/diversity/pdf/dei2021.pdf.
30 See MWOB Activity Report January 1 – December 31, 2021 (Jan. 7, 2022), available at https://www.fdic.gov/about/doing-business/mwob/mwob-rpt-dec2021.pdf.
31 Internal FDIC data.