Closed banks worry neighbors

European American Bank's 1985 decision to close its branch in Brooklyn's Flatbush section as a way to trim losses drew extremely vocal opposition from community leaders. If this bank were to pull up stakes, the Flatbush's Nostrand Avenue business strip would be left without a major commercial banking outlet. The neighborhood persuaded the bank to keep its branch open. Other Brooklyn neighborhoods, however, were less fortunate.

Thirty-six bank branches closed in Brooklyn from 1977 to 1984, leaving many customers without convenient financial services, according to a recent study by the Community Training and Resource Center in New York.

The center believes these branch closings discriminate against lower-income, inner-city minorities because it leaves them with few banking options. While a bank's departure does not necessarily lead to an economic depression, merchants and residents seem to think it marks the beginning of the end for the neighborhood, the report said.

Brooklyn and other New York City boroughs are not the only places where banks are boarding up their doors, the report said.

``While no comprehensive report on nationwide trends exists, the available data indicate a trend toward closing branches in urban areas while opening branches in the suburbs,'' according to the center's report. For example, 30 urban Philadelphia bank branches closed from 1975 to 1980, the report notes.

The American Bankers Association says it is not quite accurate to say branches are only being shut down in low-income neighborhoods.

``It's very unwise to generalize on a single state's experience,'' says William Bosies, a lawyer for the banking association. New York City ``has different demographics from other places in the country. In other areas, there are branches being closed all over because of consolidation.''

Bank branch closings, nevertheless, have caught Congress's attention. ``This branch closing `phenomenon' is still going strong, and it is not a situation solely confined to New York,'' says Rep. Robert Garcia (D) of New York, a member of the House Banking, Finance, and Urban Affairs Committee.

To mitigate the situation, or at least help communities react to possible closings, Mr. Garcia has introduced legislation that would require federally chartered banks and thrifts to notify their customers and appropriate regulators at least 180 days before shutting down a branch.

``The purpose of the notice requirement is to allow a community that feels it will be left with insufficient financial services as a result of the proposed closing to be heard,'' Garcia said on the House floor.

Garcia's public notification legislation would not prove to be too cumbersome for banks. ``At first blush, it's something we'll not oppose,'' says Peter Blocklin, the banking association's assistant legislative director. Banks ``are already providing notice'' of branch closings, he adds.

New York state-chartered banks already must comply with similar notification regulations. Those banks must notify the state and its customers as to why it plans to close a particular branch and provide a detailed map showing the distance of all other banks in the general area.

Bankers argue that increased competition and financial pressures are the reasons for closures. In order to survive, less profitable branches need to be shut down. Chase Manhattan Bank, for example, plans to close as many as 50 branches this year.

``It's not that you're not making enough money, it's that you don't put in enough effort,'' says Virginia Maya, legislative assistant with the House International Finance and Trade Subcommittee. Because banking can be complicated, some of these lower-income customers need extra assistance. ``People aren't as sophisticated, so you have to be more helpful,'' she says.

Institutions that are adapting to their lower-income neighborhoods are doing well, Ms. Maya says. In Brooklyn's Flatbush area, the neighborhood suggested that European American Bank expand its business hours so more residents could go stop by after work. Residents also noted that the branch had been without a manager for several months, which may have caused some of the problems, the Community Training and Resource Center said.

Branches that need to trim costs have been trying alternatives to shutting down, Mr. Bosies says. Increased use of computers by bank personnel and the installation of automated teller machines for customers helps to lower a branch's expenses, Bosies says.

Branch closings, however, are also a symptom of a larger problem that banks are confronting, the ABA's Mr. Blocklin says. These institutions need to keep in business, but federal regulations limit their ability to expand into new ventures - such as selling mutual funds, insurance, or real estate, Blocklin says.

``At a time when we're trying to increase revenues, we have no other choice but to reduce operating costs,'' he says. ``We've wanted to offer the other services like our competition, such as Merrill Lynch or Sears,'' but cannot because of federal restrictions.

If banks can get into other profitable areas, it would take the pressure off less profitable branches. As it stands now, however, ``if a branch isn't carrying its weight, it will be closed,'' Blocklin says.

Allowing banks to provide these services, he says, also benefits lower income neighborhoods that currently have nearby branches. ``Are these people getting insurance?'' he asks. ``Maybe the bank could offer it.''