Members of the City Council and community groups rallied outside City Hall on Monday in support of proposed legislation that would rank banks based on how much they invest in local neighborhoods.
The rally came after the Council's Finance and Community Development committees held a hearing to discuss the proposed bill, which is called the Responsible Banking Act.
The proposed legislation would rate banks based on how much financial services they provided to communities — especially low- and middle-class neighborhoods. That includes services such as investments in affordable housing, small business loans and services to help individuals with bank accounts and foreclosure prevention.
The city Department of Finance opposes the legislation. Treasurer Elaine Kloss said ratings could make it seem like the city is regulating banks.
"It would confuse people. If they saw a rating out there they would think perhaps the city feels the financial stability of a bank is being rated," Kloss said.
Councilman Brad Lander — who co-sponsored the bill — disagreed.
"Even when bank regulators give a rating based on meeting community credit needs, there is no evidence that effects people's judgments for where to bank based on safety and soundness," Lander said. "I don't understand why anyone would be confused about the city's rating in that manner."
The Department of Finance also voiced concerns that low ratings could prevent them from working with banks.
In Albany, the state banking department said it does not oppose the bill. But they said the City Council should work to improve federal and state banking regulations instead.
The City Council dismissed this suggestion, citing different needs between upstate New York and the city, as well as the rest of the country.
Council member Dominic Recchia, who heads the Finance Committee, said a city with such diverse neighborhoods needs a local law that focuses on specific communities and encourages banks to invest in those areas.
"What is wrong with a bank to be rewarded because they're doing a lot in our community and if some city agency wants to say, 'You know what, this bank is doing good. Let's give this bank a few of our deposits.' Can you tell me what's wrong with that?" Recchia asked.