Minority Jobs, Loans Pledged by Japan Bank
Japanese-owned California First Bank agreed Thursday to create sweeping new programs for minorities and low-income groups to smooth the way for its acquisition of Union Bank in Los Angeles.
California First said it will provide $84 million in loans in minority and low-income neighborhoods, offer free checking accounts for low-income consumers, increase recruitment of minorities and women, and add three minority or women directors to its board.
The agreement capped two months of negotiations with three coalitions representing 90 community organizations. Coalition leaders said the commitment was the broadest obtained so far under a federal law that requires banks to meet the deposit and credit needs of their communities.
More Services Sought
Community groups nationwide have used the 1977 Community Reinvestment Act to intervene in bank mergers and seek increased service for poor areas and minorities. Groups have filed protests with regulators to block mergers when they were not satisfied with an institution’s response.
In contrast, the groups, including the influential Consumers Union, filed papers with regulators Thursday praising the California First agreement and backing the purchase of Union Bank.
California First said it expects final regulatory approval of its $750-million acquisition of Union Bank in September. The merged institution will be called Union Bank, but the headquarters will be in San Francisco, where California First is located.
Union, which is owned by Standard Chartered of Britain, is the state’s fifth-largest bank, with assets of $9 billion. California First is No. 6, with assets of $6 billion, and is 77% owned by Bank of Tokyo.
“We recognize that with the greater size our merger with Union Bank will bring, we must accept a broader responsibility to the communities we serve,” said Seishichi Itoh, president and chief executive of California First.
Bank officials sat down in April with representatives from the three coalitions to work out an agreement on extending new services to minorities and low-income communities. The result was a 15-page plan that the bank submitted Thursday to the Federal Deposit Insurance Corp., which must approve its merger with Union.
Under the agreement, the bank will:
- Create a special lending program to provide the $84 million over two years in low-income communities for home mortgages, consumer loans and loans to small businesses owned by members of minorities or low-income people.
- Increase purchases from minority and women vendors to 20% of its total purchases during the next five years.
- Try to ensure that 60% of new managers appointed during the next five years will be women and members of minorities.
- Agree to provide more bilingual service, with an emphasis on Spanish, and appoint three minority and women members to its board within a year of the merger’s completion.
- Establish checking accounts for low-income customers with no minimum balance requirement, no monthly fee and no per-check charge.
- Increase its charitable contributions and examine ways to provide money to nonprofit organizations serving low-income people, including the possibility of treating interest rate discounts on loans as charitable contributions.
Larger amounts of money for loans have been made by a handful of other banks across the country in similar negotiations, but the issues addressed in those deals have been narrower than the California First package, according to the coalition leaders.
“This is the most sweeping agreement because it covers a lot of ground that has not been covered in other agreements,” said Elena Hanggi, a national official with the Assn. of Community Organizations for Reform Now, one of the coalitions in the negotiations.
Some banks have objected to similar negotiations with community groups, but Robert L. Gnaizda, a San Francisco lawyer who represented another coalition, said California First came to the table willingly.
“The bank understood that their long-term growth is tied to the minority population largely because the majority of new workers in California will be minorities,” said Gnaizda, whose law firm, Public Advocates, frequently represents minority members in public-issue cases.
Larry Boggs, chief spokesman for California First, said the bank expects the new services to attract additional customers throughout the state. He said the bank’s executives do not view the program as charity but as a sound investment.
