Fed Delays Security Pacific Purchase of Mitsui Stake

Security Pacific Corp.’s efforts to buy a 20% stake in Mitsui Manufacturers Bank received a setback this week when Federal Reserve officials told Security Pacific that they will delay approval while regulators continue reviewing Mitsui’s lending policies to minority and low-income communities.

Ronald Supinski, a spokesman for the Federal Reserve Bank of San Francisco, said the delay is unusual. Some industry executives suggested that the delay may indicate the application is meeting resistance from regulators as they review Mitsui’s record under pressure from community groups trying to force banks to improve their lending practices.

Mitsui Manufacturers President Jerry W. Johnston said the Los Angeles-based bank is “moving strongly down the right track” in improving its lending practices. He added that the Fed frequently takes longer than expected to decide on applications.

Los Angeles-based Security Pacific announced nearly one year ago that it planned to buy a 20% stake in Mitsui Manufacturers for $38 million as part of closer ties it is developing with Mitsui’s parent, Mitsui Taiyo Kobe Bank Ltd. in Tokyo.

The purchase must be approved by regulators, who are required under the federal Community Reinvestment Act to review banks’ lending practices in minority and low-income areas before approving mergers. The 1977 law requires banks to provide credit equitably to areas they serve.

A coalition of community and consumer groups filed with the Fed in March an objection to Security Pacific’s proposed purchase. In April, Security Pacific announced that it would commit $2.4 billion over the next decade for such programs as loans for low-income housing and minority-owned businesses.

In the letter, Fed officials said they could not act upon the application within 60 days. The letter goes on to say that the Federal Deposit Insurance Corp., which insures bank and thrift deposits, has not finished reviewing Mitsui’s compliance with the act. It also notes that the Los Angeles City Council has requested public hearings on Security Pacific’s plan to buy the stake.

A Security Pacific spokeswoman said the bank is still studying the Fed’s position and declined to comment specifically on the letter.