WASHINGTON - Regulators have given banks another incentive to finance the cleanup of environmentally damaged sites in the inner city.

A short footnote tucked inside the new Community Reinvestment Act rules gives community development loan credit for financing the cleanup or revitalization of industrial sites in the inner city.

"The (Environmental Protection Agency) brought it to our attention," one regulator said. "They wanted us to acknowledge the linkage between redevelopment of environmental sites and low-income communities."

The rules do contain a caveat: banks can't receive CRA credit for financing the cleaning of a site simply to remove the pollution. To qualify, the cleanup must lead to redevelopment.

Industry experts applauded the inclusion, saying it eases the fear that banks won't receive credit for this type of lending.

"I'm tickled that it's in there," said Alfred Pollard, senior director at the Bankers Roundtable. "The idea is that you would be cleaning this up to make the area more attractive and increase home values."

The loans are not charity. "These are regular loans that you make money off of," he said.

Karen Shaw, president of the industry consulting firm ISD/Shaw Inc., said the rule ratifies the intent of the old regulations. "But it is the kind of clarification banks have sought," she said.

Community activists also throw their support behind the initiative. "If the CRA regs can nudge banks to be involved in that cleanup, that would be a positive thing," said Allen Fishbein, general counsel at the Center for Community Change. "That's the strength of CRA. It doesn't presuppose what banks must do."

The footnote encourages banks to participate in the EPA's Brownfields Initiative, a program that tries to spur industry to develop abandoned sites in the inner city instead of building on pristine parcels in the suburbs.

Mr. Pollard said banks have been reluctant to make inner city development loans for two reasons - they couldn't get CRA credit, and feared they would be stuck cleaning up sites that turned out to be contaminated. The regulatory change resolves the first problem, and the Brownfields Initiative tries to solve the second by holding banks blameless for any contamination that is later discovered. Also, Congress is expected to enact legislation providing additional safeguards.

EPA Administrator Carol M. Browner initially recommended the CRA change in an April 24 letter the Comptroller's office.

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