On essential services

Jennifer Wells discusses the reluctance of banks to offer full-service branches in the neighbourhoods that most need them...and a simple solution which apparently hasn't been put to use in Canada:

The big picture for the Regent Park project extends to drawing in commercial activity and creating incubation spaces for small business, both of which will beg the facilities of the bank-that-isn't-there. It's as if Regent Park has been, as they say in the U.S., red-lined — deliberately denied banking services.

"In Canada we don't even talk about red-line communities," says Ballantyne. Shouldn't we be? "Sure ... We always think that we have more socially progressive legislation in Canada and in many ways are more caring about communities, but there are gaps in that thinking in Canada, and banking and financial institutions has been one of those areas."...

(The solution in New York) isn't rocket science. "Comptrollers' offices have a lot of money on hand," (New York's superintendent of banking) says. "They collect taxes and the money goes into various accounts and it sits there until it's actually used ... They have to put it somewhere, so they might as well put it somewhere where the banks are doing something good."

More specifically, the state of New York will place as much as $10 million of this quiet money at below-market rates with the fledgling branch. The City of New York may match that, giving the branch a core deposit base of $20 million. In normal circumstances, it can take years to make a bank branch viable. The purpose of the BDD is to kick-start its operations to success...

Deposit-taking is one measure of success; loan extension is another. "It's just as important as a source of loans into the community for business development, for mortgages," says Taylor. "Banks are a much better place to go than your local loan shark."

As the article notes, the presence of a bank in a neighbourhood isn't itself a cure-all. But some readily-available source of financing is an essential element for small business growth on a scale large enough to help boost a community's general economic standing...and it's hard to see how that fact has been ignored so far in Canada.

At the same time, though, Canada likewise has something to offer to banks in return for any willingness to move into underserviced communities. In addition to the potential to use "quiet money" to provide seed funding for the new banks, there's also that small matter of bank mergers...where a condition requiring some movement into underserviced areas would fit nicely with the NDP's willingness to support mergers on the condition that the result not be a loss of services.

The solution would require a fair bit of coordination between different levels of government, but that can always be resolved once all levels recognize the importance of a problem. The biggest obstacle for the moment is the lack of any recognition that a lack of banking services is both a problem that needs to be dealt with, and one that can be readily solved.