Japanese Banks Scored on Loans : Finance: A San Francisco group says Japanese-controlled banks in California aren’t doing enough for minorities and low-income consumers. The banks call its criticism misleading.
Japanese-controlled banks in California make few home loans to minority and low-income consumers, according to a report to be released today by a San Francisco-based community group.
The report on the lending practices, prepared by the Greenlining Coalition in San Francisco, is another shot across the bow in the ongoing publicity battle by community groups to pressure the state’s large banks into doing more for minority and low-income Californians.
Regulators scrutinize banks’ records of loans to low-income and minority groups, and in some cases a poor record has killed merger proposals.
Executives of Japanese banks called the criticism misleading because Japanese banks in California, unlike Bank of America and others that push consumer banking, are primarily business lenders who make few home loans.
“If we had made one home loan to a black, we could say 100% of our home loans were made to minorities. But it would be an absurd statement,” said Jerry W. Johnston, president of Mitsui Manufacturers Bank, whose parent is Mitsui Taiyo Kobe. He said Mitsui only dabbles in home equity lending and does not make conventional home loans.
The study contends that five Japanese-controlled banks in the state--Bank of California, Sanwa Bank California, Sumitomo Bank, Union Bank and Mitsui Manufacturers Bank--in 1990 made 68 home loans to blacks, 513 to Asian-Americans and 224 to Latinos. Total loans were only 3,287, less than 5% of the home loans made that year by the state’s largest bank, Bank of America.
Overall, 22% of the home loans made by Japanese banks were to minorities, with the highest percentage--15.6%--to Asians. Just 2% of the loans went to blacks, the study says, and only 6.8% to Latinos.
Although the percentages of loans made to minorities by the Japanese banks are in line with percentages of loans made to minorities by other banks, the coalition argues that the Japanese banks--four of which are among the 10 largest in the state--should do more to meet the loan needs of low-income and minority consumers.
The results are based on 1990 home lending data released late last year by the Federal Reserve.
The coalition says its study is the first major look at how well Japanese banks, whose presence increased dramatically in California in the 1980s, meet the credit needs of low-income and minority persons.
The criticism comes as banks are under rising pressure from community groups to do more for low-income and minority consumers--as called for in the Community Reinvestment Act of 1977. Last week, groups complained in Federal Reserve Board hearings that Bank of America’s parent, BankAmerica Corp., should be forced to do more in exchange for federal approval of its acquisition of Los Angeles-based Security Pacific Corp.
Union Bank Vice Chairman Richard C. Hartnack noted that the San Francisco bank, which is controlled by Bank of Tokyo, grew over the years out of a series of mergers of business banks. As a result, he said, it has never had a strong presence in minority or low-income areas and gets few home-loan applications.
Sanwa Bank California Vice President Margaret A. Merrett said the Los Angeles bank, part of Sanwa Bank Ltd., made few home loans in 1990 in part because it was revamping operations.
Robert Gnaizda, a lawyer with the Greenlining Coalition, said that if Japanese banks contend that their numbers are unfavorable because they are business banks, they should provide numbers showing that they are lending to minority businesses. So far, he said, they have spurned such requests. “We take the position that it is part of their overall obligation,” Gnaizda said.
At the same time, Gnaizda said, Japanese banks have been open to suggestions and are taking steps to improve their records.
Despite calling the criticism unfair, executives at some of the banks said they recognize that they should do more for minority and low-income residents. They said they are working to improve their lending records in low-income and minority areas, adding that several new programs have been started recently at the urging of the coalition.
