Report

Stakeholders’ Aversion to Inequality and Bank Lending to Minorities

Abstract: We document large and persistent cross-sectional differences in banks’ propensity to lend to minorities based on bank stakeholders’ aversion to inequality. Using mortgage application data from the Home Mortgage Disclosure Act, we show that banks with more inequality-averse stakeholders are more likely to approve applications in high-minority relative to low-minority areas and, within census tracts, from non-white borrowers relative to white borrowers. These differences (i) are not driven by applicant selection or loan officer assignment, (ii) coincide with stakeholder alignment, reflected in depositor retention and disclosure of initiatives for underserved communities, and (iii) do not predict worse ex-post loan performance.

JEL Classification: E51; J15;

https://doi.org/10.59576/sr.1079

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Staff Reports

Publication Date: 2023-11-01

Number: 1079

Note: Revisded March 2026.