Checking Out Inner-City Banking : Minority banks will need help if they are to pick up the slack of B of A / Security merger

Banking is neither hassle-free nor convenient in parts of South Los Angeles. Bank of America and former rival Security Pacific have been among the few major commercial banks willing to do business in the working-class sections of that region. The recent merger of these two institutions could result in the closing of duplicate branches. But it need not automatically create even larger gaps in banking services.

As part of the merger, B of A promised to close no branch that is the only provider of insured banking services in a neighborhood. That pledge should reassure residents of sections where banks are scarce.

The bank also made a commitment that the merger would create no new “bank-starved” areas by closing or consolidating branches.

One way B of A can make good on its promises is by aggressively using its clout and significant financial wherewithal to help minority banks or thrifts buy some branches in minority areas. Such deals would do more than simply maintain banking services. The changes in ownership would also increase banking choices, now often limited.

California’s only black-owned commercial bank, Founders National Bank of Los Angeles, has already approached B of A to discuss purchasing branches. Although Founders is based in the Crenshaw district, outside of the traditional boundaries of South-Central Los Angeles, the black-owned bank is willing to provide banking services in any area that has a minority presence.

Founders, and other minority banks or savings and loans with limited capital, would need help to buy the branches. If the deals made sense, B of A could provide that help with seller financing.

The merger of B of A and Security Pacific initially frightened some residents of South Los Angeles. They were concerned about the loss of branches and other services. They also questioned the commitment of the new bank, given the past reluctance of financial institutions to make business loans, home loans and other direct loans in their neighborhoods.

In response to those fears, the merged B of A set a lending goal of $12 billion in lower-income communities in the 11 states it serves. The bank also made assurances about the level of banking it would maintain in those areas.

The scarcity of banks in parts of Los Angeles forces many residents to conduct expensive transactions at check-cashing outlets or pawn shops. These hardships must not increase.