A program designed to channel funds to minority depository institutions (MDIs) and community development financial institutions (CDFIs) is just about to be unveiled, the board chairman of the federal insurer of bank deposits said Friday.
Speaking to a group of Texas bankers, Federal Deposit Insurance Corp. (FDIC) Chairman Jelena McWilliams said the “Mission-Driven Bank Fund” will have two anchor investors and one founding investor. The board chairman said the anchor investors are hiring a fund manager and working toward a first closing in the final quarter of this year. She said that timetable was set so that the fund may receive pitches from banks early in the first quarter of 2022.
She gave no particular date of when the fund will be unveiled publicly, however. She did reiterate that the FDIC will retain an advisory role to support the fund’s mission focus, but will not contribute capital to, manage, or be involved in investment decisions of the fund.
The fund – which McWilliams described as something no other regulatory agency has done that is even “remotely similar” – is designed to “provide a vehicle for private sector and philanthropic investment in FDIC-insured Minority Depository Institutions (MDIs) and Community Development Financial Institutions (CDFIs).”
“Mission-driven banks” are described by the FDIC as those MDIs and CDFIs that commit larger portions of their portfolios to minority, lower-income, and rural communities. Investments in the Mission-Driven Bank Fund, the FDIC has said, would assist MDIs and CDFIs to (among other things) raise capital necessary to serve communities; weather economic downturns; attract technical expertise; and acquire and use technology.
The “anchor investors” and founding investor were selected, the agency said, through a competition to counsel the fund’s investing. Under the rules of the competition, the investors were required to have experience managing investment funds and with prior work with MDIs and CDFIs, as well as a “deep understanding of the communities they serve.”
Investments made in the institutions by the fund may include direct equity, structured transactions, funding commitments, and loss-share arrangements, according to the agency.