Microsoft, Truist Bank issue RFP for FDIC-backed investment fund for Black-owned, minority-led banks

Microsoft, Truist Bank issue RFP for FDIC-backed investment fund for Black-owned, minority-led banks

BCN Staff – Dec. 5, 2021 — Silicon Valley software and computer giant Microsoft Corp. and Chicago-based Truist Financial Corp. announced Thursday they are backing a new investment fund to capitalize Black-owned banks and minority-led financial institutions.

After the Federal Depository Insurance Corp. (FDIC) in September unveiled an investment fund that offers investors a way to support banks owned by and in support of people of color, Microsoft and Truist emerged this week with a request for proposal (RFP) to identify qualified candidates to manage the fund on behalf of investors. The RFP submission period will be open Dec. 2, 2021, through Feb. 4, 2022.

As anchor investors, Microsoft and Truist will lead the investment fund. In addition, Discovery Inc. will join as a founding investor in the fund bringing the combined initial commitment to $120 million, with additional investments expected.

“Microsoft and Truist have answered the call to become anchor investors and to assist the FDIC in developing this Fund for the benefit of mission-driven banks and, most importantly, the people and places these institutions serve,” FDIC Chairman Jelena McWilliams said on Sept. 16. “It is our hope that with the commitment of these industry leaders, more private equity investors will join the growing ranks of those committed to building opportunity and prosperity where this support is needed the most.”

The Mission-Driven Bank Fund is a capital investment vehicle designed by the FDIC to channel private capital and other resources to FDIC-insured Minority Depository Institutions (MDIs) and Community Development Financial Institutions (CDFIs), which collectively are mission-driven banks. These institutions play a crucial role in serving the needs of minority and rural neighborhoods through affordable financial products that support small-business development, community development, affordable housing, and other initiatives that foster growth and create opportunity and prosperity.

According to a widely cited 2019 report commissioned by McWilliams, the number of MDIs in the U.S. declined by 9.1% between 2001 and 2018. What sticks out about this report was that the number of Asian American and Hispanic American MDIs increased but African American MDIs were decimated by the Great Recession in 2008 and the financial and housing crisis fallout in the decade after.

As the MDI sector has changed, so has its composition in terms of minority status. According to the FDIC report, African American MDIs represented 15% of all MDIs at year-end 2018, compared with nearly 30% of all MDIs in 2001. During that same period, the asset value of Black-owned MDIs has also taken a big hit. In 2018, African American banks had less than 2% of total assets for all MDIs, compared with 6% in 2001. The combined asset value of all Black-owned banks in the U.S. is only a tidy $4.5 billion, less than the overall value of a small community bank in Arkansas.

On the other hand, Community Development Financial Institution, or CDFIs, pledge 60% of their lending to low- to moderate-income communities. In Arkansas, CDFIs such as Southern Bancorp, People’s Trust, Communities Unlimited Inc. and Arkansas Capitol Corp. promote community development in distressed urban and rural communities across the state by increasing the availability of credit, investment capital and financial services available.

The Community Development Financial Institutions (CDFI) Fund housed within the U.S. Treasury Department was established in 1994 through the Riegle Community Development and Regulatory Improvement Act. Since then, the fund has awarded more than $2.8 billion on a competitive basis to CDFIs including Native CDFIs, small and emerging CDFIs and financial institutions through the BEA Program

Under the new FDIC program, Microsoft and Truist said the new fund will provide “patient capital” to mission-driven banks serving historically excluded communities across the country, prioritizing social impact objectives over the fund rate of return. In addition to investment capital, the fund will be focused on providing access to support resources such as technical training, assistance in developing lending and investment products, banking operations, and more.

As anchor investors, Microsoft and Truist are seeking fund manager candidates that represent a diverse and inclusive pool of investment management talent including minority- and women-owned fund management firms. The RFP period is intended to ensure that the selected fund manager is well suited to meet the diversity- and mission-driven intentions of the fund. To achieve this objective, a partnership of fund managers or more than one fund manager may be selected. Microsoft and Truist will not be involved in the investment decisions of the fund.

More information and a download of the RFP can be found at RFP website. Questions about the Mission-Driven Bank Fund or the RFP process can be directed to mdbf@sullcrom.com. Interested candidates are encouraged to send an email to be added to the distribution list for news and updates affecting RFP submissions.

The Mission-Driven Bank Fund will enable MDIs and CDFIs to build size, scale, and capacity to in turn allow them to provide affordable financial products and services to individuals and businesses; stimulate economic and community development; and build opportunity and prosperity.

In designing the framework of the fund, the FDIC engaged approximately 70 chief executive officers of MDIs and CDFIs and their trade groups as well as potential investors, investment consultants, and philanthropic organizations. The creation of the fund supports the FDIC’s commitment to preserving and promoting mission-driven banks. 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 the fund manager selection process or investment decisions of the fund. 

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