An increasing number of foreign banks are considering joining in Community Reinvestment Act-type programs even though they are not legally required to do so.

Foreign bankers say they are concerned that if they don't develop programs or make contributions on their own, the Federal Reserve Bank may soon require them to comply.

They add that voluntary actions could help ward off unwelcome and expensive changes required by legislation that seeks to have foreign banks comply with community reinvestment laws.

More Joining Every Week

Foreign bankers said a growing number of non-U.S. banks are either joining or considering joining voluntary investment programs.

"I see more foreign banks participating in voluntary programs with every passing week, even if they are not required to," said Eric K. Tarlow, vice president with IBJ Schroder Bank and Trust Co. in New York.

"One reason is that they are concerned that the law might change and want to understand that they might have to do," he said.

"The other issue is that they want to demonstrate that they're part of the community where they have a corporate presence."

Most Are Not FDIC-Insured

Under federal legislation, only banks insured by the Federal Deposit Insurance Corp. that solicit retail deposits from the local community are governed by the Community Reinvestment Act.

The act obliges banks that take deposits locally, to lend a certain portion of those funds to the community.

However, the act excludes foreign banks, most of which are not FDIC insured and take in only wholesale deposits from corporations and other banks.

Despite this, foreign banks are coming under increasing pressure from state and federal banking authorities to allocate a portion of their lending to community related projects, such as low-income housing.

Many Already Participate

The New York State banking department, for example, is currently preparing a report on how it believes foreign banks should contribute to CRA-style programs.

"CRA increases in importance every day and the reality is that people in Washington are as politically attuned to the issue as in Albany," Mr. Tarlow said.

At latest count, 20 foreign banks in New York had joined a CRA-style program known as Global Resources for Affordance Neighborhood Development, or Grand Bankers Trust New York Corp. is the agent.

Committing at Least $2 Million

The members are Industrial Bank of Japan -- IBJ Schroder's parent -- Bank of Tokyo Ltd., Canadian Imperial Bank of Commerce, Barclays Bank PLC, Banco Popular de Puerto Rico, Sumitomo Trust and Banking Co., LBS Bank, Bank of Ireland, Mitsui Trust Bank, Arab-American Bank, Fuji Bank and Trust Co., Dresdner Bank, Korea Exchange Bank, Korea First Bank of New York, Mitsubishi Trust and Banking Corp., Toyo Trust Company of New York, Nippon Credit Trust Co., Bank Audi, Safra National Bank, and Banco Espanol de Credito.

The program provides a $50 million revolving credit commitment toward the construction of affordable housing for low-income families.

Participating banks contribute a minimum of $2 million each and lend at an interest rate equal to the three-month London Interbank Offered Rate plus 1%, with 75% of the lending guaranteed by the State of New York Mortgage Agency.

Grants to Local Groups

In addition, foreign banks are also offering $1,000 and $2,000 grants to various local community housing organizations, such as the Manhattan Borough Development Corp., the Fordham Institute for Affordable Housing, and University Neighborhood Housing.

Some foreign banks have also deposited $100,000 with the minority owned Community Capital Bank in Brooklyn.

In still another CRA related program. called Cash, Bank of Tokyo, Banco Popular, Chemical Banking Corp., Bankers Trust, and Chase Manhattan Corp. have come up with a $500,000 pool to help low-income families become home-buyers by providing money for some expenses associated with purchasing a home.

|Good Program for Them'

The revolving credit provided through the Grand program expires at yearend. Gary Hattem, vice president at bankers Trust, says he expects the program will be renewed.

"My sense is that all the banks will renew it for January because it's proven to be a good program for them," Mr. Hattem said.

He emphasized the since the program is 75% insured by SONYMA, banks take on little risk when they join.

Foreign bankers who do not participate in the program said they are already beginning to sense pressure to develop CRA-style programs.

|A Guaranteed Roadblock'

One foreign banker, for example. suggested that his bank might join the Grand program in its own self-interest.

"Although [foreign banks] are not currently obligated to comply with Community Redevelopment Act requirements, it appears clear that we probably will have to sometime in the future as CRA compliance is extended by the Fed beyond FDIC-Insured banks," the banker stated.

"Lack of satisfactory compliance is a guaranteed roadblock to approval of any applications we may make for a new presence of any kind elsewhere in the U.S.A.," he added.

"Being proactive therefore can only be interpreted as a plus," he noted.

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