Industry Letters

Banking Department Letter Urges Institutions to Partner with Youth Development Programs Serving Low and Moderate Income Populations

January, 2000


A happy and healthy New Year! As we begin this new millenium, I would like to communicate with you once again, concerning a subject of great importance to us all.

In September 1998, the Banking Department released a letter urging banks to take the lead in forming partnerships with child care providers serving low and moderate income populations and communities. In particular, the letter outlined how institutions would be eligible to receive "enhanced" CRA credit in return for developing long-term, multi-faceted relationships with these agencies. Known as "Adopt-a-Center", this initiative reflects an understanding that the viability and sustainability of a community depends greatly on the strength of its economic base, as well as access to employment, child care, education, and health care.

Since that time, Department staff has conducted a great deal of outreach in communities throughout the state. Most notably, child care conferences and meetings have been held in Nassau County, as well as Albany and Buffalo, with additional efforts planned for New York City in the coming year. Additionally, staff has worked with individual banks, childcare providers and local government agencies seeking information and guidance on partnership creation. I am proud to report that over the past year several successful partnerships have been launched and/or strengthened in connection with this effort.

While Adopt-a-Center's initial focus was on care for young children, clearly programs that focus on at-risk youth from pre-school up through their young adult years represent a critical part of the continuum of services anticipated by this initiative. As I have stated at numerous speaking engagements throughout the past year, I can think of no other topic as important as our collective responsibility for the growth and development of young people. Quality youth development programs can play a critical role in enhancing educational resources and providing opportunities for young people to build self-esteem, remain in, or perhaps re-connect themselves to their communities.

However, as with childcare, the barriers to developing, sustaining or building the capacity of youth programs can be daunting. These initiatives are often labor and resource-intensive, and likewise, need a long-term, reliable source of capital to sustain their capacity to deliver services. While the banking industry cannot be expected to solve these problems on its own, many of these issues can be addressed through collaborative ventures that draw upon the resources of many sectors, including lending institutions. In order to encourage these efforts, at the direction of Governor Pataki, the Department is now expanding the "Adopt-a-Center" initiative to give enhanced CRA recognition to banks’ innovative, long-term, and multi-faceted partnerships with youth development programs serving low and moderate income populations.

While the greatest benefit would be a long-term financial commitment to provide capital grants or operating funds, partnership opportunities also include loans and technical assistance to further build the capacity of the programs. Such a relationship can reap significant rewards for financial institutions, as they foster a stronger local community, help in new job creation and enable more parents to remain in the workforce.

Many of the strategies recommended in the childcare letter are equally applicable in the context of youth programs. For convenience, they are repeated below. Once again, the guiding philosophy is that a more focused approach may prove to be far more effective than the practice of scattering small amounts of short-term funding across many different programs. To the extent that a bank's activities meet the definition of community development, an institution would receive favorable consideration for its support in a CRA Performance Evaluation. Moreover, if appropriate, the institution would be recognized for the innovativeness, complexity and responsiveness to community needs, of its activities, and in the case of qualified investments, the degree to which they are not routinely provided by private investors.

The "Adopt-a-Program" approach:

The "Adopt-a-Program" strategy reflects a comprehensive partnership approach to local investment. While the emphasis is on providing multi-year capital or operating funds, the institution effectively blends a variety of financial, technical and human resources to build a single agency's capacity to deliver services. The impact of this approach can often be greater than the sum of its parts, particularly when a bank's investment is designed to leverage additional funding from other sources (i.e., matching programs). This strategy might include a combination of:

  • Capital grants or recoverable loans to build equity
  • Multi-year operating grants
  • Loans for facilities expansion or working capital
  • Technical assistance on financial matters, including board representation, loaned executives, accounting or fundraising
  • In-kind donations of space, equipment, computers, etc.
  • Financial services education for program employees, customers and their families
  • Specialized retail banking services for program employees and customers’ families
  • Staff volunteer efforts

The pooled resources approach:

Rather than focus directly on a single provider, some institutions prefer to work with intermediaries with expertise regarding these types of programs that can spread the risk of an investment. These organizations typically pool money from various sources for the purpose of providing financing and technical support to youth programs. The Department strongly encourages banks and intermediaries to continue their efforts to collaborate on developing new approaches for financing facilities, making capital financing more predictable and efficient and strengthening programs by providing technical support and financial management training for providers. Potential strategies include:

  • A collaborative grant funding initiative
  • A consortium approach to lending for facilities development or working capital
  • An equity pool that can be used to buy down credit or as a credit enhancement (i.e. loan guarantee fund, mortgage insurance, loan loss reserve)
  • A technical assistance pool for youth development agencies
  • A financial services education consortium targeting program employees and customers’ families.

Please note that this is not intended to be an exclusive list. The Banking Department anticipates further developments in this area, and would like to be kept abreast of innovations, as they evolve.

Please feel free to contact Gail Bernstein-Gold, Director, Community Affairs Unit, at (212) 618-6477, with any questions or comments you may have.


Elizabeth McCaul
Acting Superintendent of Banks