Sumitomo Makes a Commitment : A coup for Greenlining Coalition in its continuing battle against financial redlining

In an impressive commitment to the neglected areas of California, the Japanese-controlled Sumitomo Bank has promised to invest $500 million--10% of its assets--in minority businesses and affordable housing. That action holds out promise to poor and moderate-income communities where more jobs, services and housing are desperately needed.

Sumitomo can make a great impact if the bank uses its business expertise to encourage economic development in Los Angeles neighborhoods devastated by the riots and in the other pockets of poverty throughout the state. Any significant new investment chips away at financial redlining by big banks that has frustrated business development and chased away potential jobs from those areas.

More jobs should result from the bank’s promise to award at least 20% of its contracts for supplies and services to businesses owned by minority members or disabled people.

On the housing front, Sumitomo can provide the greatest help by investing in decent rental housing for families. That need is urgent. In addition to that investment, the bank needs to improve its record on home mortgages, another well-documented area of financial redlining.

To diversify the bank’s leadership, Sumitomo has agreed to add minority members to its board of directors. A paid minority advisory board is also scheduled to advise top management.

These commitments should change some of the priorities of the bank. Additional management integration at the top will make Sumitomo more representative of the community it serves, and more responsive.

The Sumitomo commitment was negotiated by the Greenlining Coalition, a group of 19 minority and consumer organizations that battles financial redlining.

The coalition negotiated a similar agreement with the state’s largest financial institution, Bank of America, which set a lending goal of $12 billion in low-income communities. Other banks are targeted.

Sumitomo’s agreement has been filed with the Federal Deposit Insurance Corp., which in the past has been critical of the lack of community investment by Sumitomo. Stronger enforcement of federal community reinvestment requirements would lead more banks to make similar investments.

Minorities seeking mortgages have been consistently discriminated against regardless of income and credit records, according to Federal Reserve studies. The information on business loans, though based more on anecdote than on bank disclosure, is similarly damning.

Given the long history of neglect by the banking industry, Sumitomo Bank’s commitment merits replication: Banking institutions should seek to serve California in all its diversity.