Abstract
Existing research has established that minority banks and depository institutions are concentrated in minority-populated areas, tend to serve the interests, and ensure the economic viability of the minority populations, primarily through cultural affinity. However, this research has mostly focused on African American banks. In this paper, we attempt to understand the characteristics of Asian American Owned Banks (AAOBs) and how they differ from mainstream banks. Our results show that AAOBs generally tend to perform better than mainstream banks. A closer look at the ethnic breakdown of AAOBs reveals that Indian American banks perform better as they tend to serve a financially better off Indian American population. On the other hand, Korean American banks tend to take on more risk. Overall, AAOBs are more risk averse than mainstream banks. These unique characteristics of AAOBs have regulatory and governance implications.
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Notes
From FDIC’s website: https://www.fdic.gov/regulations/laws/rules/5000-2600.html#fdic5000policyso
For the 2017 conference, see: https://www.fdic.gov/regulations/resources/minority/events/interagency2017/
Author calculations from FDIC MDI list and call report data.
We would like to extend our gratitude to an anonymous referee for pointing us in this direction of related literature to strengthen our arguments.
Fitch: Asian-American Banks: Concentration Risks Offset Strong Capitalization, October 16, 2014: http://www.reuters.com/article/fitch-asian-american-banks-concentration-idUSFit77502020141016
Krebsbach (2007), “Affluent Asian Americans Elusive for Some Banks,” US Banker, February 2007, 12. Found at: https://www.americanbanker.com/news/marketing-affluent-asian-americans-elusive-for-some-banks
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Kashian, R., Xue, Y. & Kamal, R. Ownership characteristics of Asian American banks. J Econ Finan 43, 528–551 (2019). https://doi.org/10.1007/s12197-018-9461-y
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DOI: https://doi.org/10.1007/s12197-018-9461-y