A prominent community activist group is urging federal regulators to block Zions Bancorp.'s planned acquisition of Sumitomo Bank of California.

In a protest filed last week with the Federal Reserve Board and Federal Deposit Insurance Corp., the Greenlining Institute said less than 1% of Sumitomo's 1996 commercial loan volume went to businesses owned by African- Americans.

In addition, the Labor Department is investigating whether the Japanese- owned San Francisco bank discriminated against blacks, Latinos, or women in its hiring of top managers, the group said.

The Greenlining Institute's general counsel, Robert Gnaizda, said, "Allowing this acquisition to go through would reward Sumitomo while a government agency is still probing its hiring practices."

Robert G. Sarver, who has been appointed Zions' chief executive officer for California, denied the accusations. He said they are based on outdated information.

"When I look around the Sumitomo offices today, it looks like the United Nations," Mr. Sarver said. "Their representation of different ethnic categories in senior management is very strong."

Though Mr. Gnaizda conceded that Sumitomo's work force has become slightly more diverse, he said most of the employees are still of Japanese descent. This has led the bank to focus on lending to customers with a similar ethnic background, he said.

"They have been dependent on the Japanese community for their profits," Mr. Gnaizda said.

He said the Labor Department began its investigation in December 1996 after the Greenlining Institute complained about the hiring practices. The investigation continues, he said, because Sumitomo has been "blocking information on pay differences and promotions.".

A Labor Department official was unavailable for comment last week.

Greenlining also called for a $4.2 billion, 10-year low-income lending commitment from Zions in California, where its business will consist of the recent and pending acquisitions of the $5 billion-asset Sumitomo, $720 million-asset Grossmont Bank of San Diego, and $350 million-asset Pacific National Bank of Escondido.

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