Do minority banks matter?

Prithu Vatsa

Journal of Financial Intermediation, 2025, vol. 63, issue C

Abstract: This paper estimates the elasticity of minority credit supply to deposit shares of Minority Depository Institutions (MDIs). I use within-county tract-level variation in exposure to the Community Reinvestment Act and show that if a census tract loses MDI presence following a merger between an MDI bank and a community bank, its minority mortgage credit declines by 40%. These effects are driven by the loss of operationally efficient MDIs, and about half of the overall impact is attributable to the loss of mission alone. A 1% increase in county market shares of such tracts leads to roughly a 3% decrease in county-level minority homeownership.

Keywords: Minority Depository Institutions; Community banks; Community Reinvestment Act; Mortgage Credit; Financial inclusion (search for similar items in EconPapers)
JEL-codes: G21 I38 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:63:y:2025:i:c:s1042957325000312

DOI: 10.1016/j.jfi.2025.101163

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