WASHINGTON — The Federal Reserve Board and the Office of the Comptroller of the Currency on Monday approved Citigroup Inc.’s $1.6 billion deal to buy European American Bank.

The acquisition, which still needs clearance from the New York State Banking Department, would give Citigroup control of $64.5 billion of deposits in the state. It would remain the second-largest depository institution in New York and the largest commercial banking company in the country.

The New York regulator is expected to vote July 12 on the deal for the Uniondale, N.Y., subsidiary of ABN Amro Holdings NV.

The federal approval came a week after Citigroup announced that it would stop selling single-premium credit insurance, the product most identified with abusive lending tactics, and promised the New York banking department that it would improve lending in minority communities.

The moves are thought to be among the factors the Fed considered in approving the purchase.

The Fed order made brief mention of Citigroup’s agreement, and consumer advocates said the connection between the two was clear. “I can’t but help think that it’s connected,” said Matthew Lee, director of Inner City Press/Community on the Move. “But I still believe there were more troubling, unresolved issues at the end of the process than at the beginning.”

As part of the approval the Fed will “conduct a thorough examination” of Citigroup’s actions to prevent abusive lending practices at its subprime affiliates, CitiFinancial and the former Associates First Capital, it said in the approval order, which was released late Monday.

Associates, which Citigroup acquired last year, sparked the Federal Trade Commission in March to sue Citigroup, charging “systematic and widespread abusive lending practices.”

CitiFinancial also came under fierce criticism from lawmakers and consumer advocates after a former employee said it used deceptive practices with elderly, poor, and other vulnerable borrowers.

As part of the approval, the Fed is requiring that starting Sept. 30, Citigroup submit quarterly reports for two years on the status of all major litigation involving any of its affiliates engaged in subprime lending as well as its compliance with resulting court orders or settlements.

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