WASHINGTON - To avert opposition to their merger, the California subsidiaries of two huge Japanese banks agreed Wednesday to lend $11.25 billion over the next 10 years under the Community Reinvestment Act.

Union Bank and Bank of California pledged to loan 4.5% of their combined $25 billion in assets every year from 1996 through 2006 for low-income housing, small businesses, and inner-city economic development projects.

The two groups who negotiated the CRA deal - the California Reinvestment Committee and the Greenlining Institute - said it is the largest percent of bank assets ever committed under CRA.

"Union Bank has now set the leadership standard for CRA," said John Gamboa, executive director of the Greenlining Institute. "This agreement should serve as a guide, if not the model, for the proposed giant Chemical Bank/Chase Manhattan merger."

The institute is advising the National Community Reinvestment Network, which is negotiating a CRA deal with Chemical. If the merged Chase and Chemical, soon to be the nation's largest bank, follows the Union Bank model, Chemical would pledge to invest $135 billion over 10 years, according to the institute's general counsel, Bob Gnaizda.

Union Bank of California will be a subsidiary of the world's largest bank when Bank of Tokyo and Mitsubishi Bank combine April 1.

Beyond CRA lending, Union Bank has agreed to award 25% of its vendor contracts to minority-owned businesses. In addition, the bank will donate 2% of its net profits after taxes to charity.

Both Union Bank and Bank of California currently hold "satisfactory" ratings under CRA.

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