The Community Development Bankers Association (CDBA) and National Bankers Association (NBA) have launched the Advancing Communities Together (ACT) Deposit Program. The initiative is designed to channel vital funding to banks serving low-income and minority communities while also ensuring all deposits are eligible for FDIC insurance.

At launch, four major financial firms have deposited $35m in the programme. Additional deposits are anticipated from a broad range of depositors, including corporations, foundations, and universities.

“The ACT Deposit Program created a secure and efficient way for community development banks to attract and retain large institutional deposits,” said Jeannine Jacokes, Chief Executive Officer of CDBA, which represents CDFI, MDI, and climate-focused banks. “The support from these firms and future depositors will create a lasting positive impact in underserved areas.”

Nicole Elam, President and CEO of the NBA, added: “The ACT Deposit Program offers a streamlined approach for providing essential deposits to minority banks serving the underserved and communities of colour. This initiative empowers our members to facilitate homeownership, business growth, and financial stability, contributing to job creation and the overall vitality of communities across America.”

Founding firms: Blackstone, BNY Mellon, Warburg Pincus, and IntraFi

Martin Brand, Head of North America Private Equity at Blackstone, said: “Community banks play an essential role in boosting economic growth and job creation across the country. We’re pleased to support this innovative partnership to help expand access to capital in underserved markets throughout the US.”

“Empowering our clients and partners with solutions to advance a more inclusive economy, and to enable their own sustainability objectives is core to what we do,” said Laide Majiyagbe, Global Head of Financing and Liquidity at BNY Mellon. “We are proud to play a central role in the ACT Deposit Program via our LiquidityDirect platform to connect socially motivated investors and community banks to help fuel growth for local communities across the country.”

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Key benefits of the programme

The ACT Deposit Program simplifies the process for businesses, nonprofits, community organisations, and high-net worth individuals to place at least $5m with a community development financial institution (CDFI) or minority depository institution (MDI) bank. Deposits made through the program are distributed among the more than 70 participating CDFIs and MDIs, amplifying the impact of each deposit.

The programme is powered by IntraFi through its ICS service, which includes 3,000 banks nationwide. This collaboration offers millions of dollars in aggregate FDIC insurance.

Participating depositors can choose a CDFI or MDI as their relationship bank. This will then allocate part of the deposit to other participating banks. This ensures benefits are shared across all banks in the programme. Depositors can also choose to spread their funds among all participating CDFIs and MDIs, with all deposits eligible for FDIC insurance.

Why this programme is needed now

CDFI and MDI banks need deposits to leverage the more than $6bn in capital they received from the Treasury Department in 2022. This forms part of the Emergency Capital Investment Program (ECIP), which aims to boost lending in communities hit hard by the pandemic.

To date, 75 CDFIs and MDIs have joined the programme. Deposits in the programme will yield near-market interest rates. Depositors will receive regular reports on how their funds are being used to support communities.

The ACT Deposit Program is open to any depositor looking to make a positive impact through socially responsible investments in underserved markets while ensuring their deposits are protected by FDIC insurance.