Local Asian banks try to break out of ethnic niche; Spanish-speaking staffs hired to serve Hispanic clients.

One of the biggest flaps during Los Angeles' last mayoral race arose from charges of loan discrimination by Cathay Bank, a Asian-American owned bank based in the Chinatown section of downtown L.A.

And some of the accusing fingers were pointed at then-candidate Michael Woo, whose father sits on Cathay Bank's board of directors.

The bank allegedly discriminated against non-Chinese members of the community, the accusations went. Those accusations were absolutely unfair, the bank's marketing officer maintained.

Nonetheless, Cathay Bank and other local Asian-owned banks are diversifying beyond their ethnic groups, and doing so for motives other than anti-discrimination compliance.

"We're doing this not just for regulatory reasons, we're also looking at profit" related Cathay Bank's marketing officer Monica Wong. The "regulatory reasons" she referred to are requirements set forth in the Community Reinvestment Act, which mandates that banks meet the credit needs of the entire community in which they operate.

The Bank of Canton of California, a San Francisco-based bank with two branches in L.A. County, is another Asian-owned lending institution grappling with loan-discrimination issues.

"The (Bank of Canton of California) was established in 1937 because immigrant Chinese could not get credit through established banks," said Ching Kao, the bank's marketing director and senior vice president, who works out of the Monterey Park office. "Our (most recent) CRA rating was 'need to improve.' The government forgets why this bank was established," Kao asserted. "The Chinese community is a minority too."

Now the Bank of Canton, which has been operating in Los Angeles since 1981, is reaching out even more to other ethnic groups with the same problem as the early Chinese immigrants -- they can't get loans from mainstream banks.

Like Cathay and other L.A.-area Asian banks surveyed, Bank of Canton offers low-interest loans for low-income families and small businesses. Bank of Canton calls its credit package the Neighborhood Self Reliance Loan Program.

"We're trying to help start-up businesses and families with limited means," Kao related. Bank of Canton markets this program through community newspapers and neighborhood chambers of commerce, a popular method for other Asian banks, as well.

Kao said he sees a need to do more, especially to reach the local Spanish-speaking community. "Our strategy is to make our staff more complementary to the market. Because of demographic changes, we need to recruit more Spanish-speaking staff, to look at the possibility of locating new branches in that community, or look at forming joint alliances with banks in that niche. All that is being studied," Kao said.

Wong of Cathay Bank argued that targeting an ethnically diverse clientele is not new for her employer.

"We've been very active in non-Chinese community marketing practically since day one," Wong declared. "We allocate 26 percent (of our marketing budget) to the non-Chinese community." Still, she noted, "the return on investment is lower than in the Chinese community. Banking is not like other retail businesses" because of the intensely personal nature of private-sector lending.

Wong credits Cathay's most recent 'need to improve' CRA rating to the mayoral election rumors. Previously, she maintained, the bank had received satisfactory ratings.

It was a 'need to improve' rating that spurred General Bank, a downtown L.A.-based bank owned by Taiwanese-Chinese-Americans, to take another look at its non-Asian business.

"I knew we had to go out of our niche market," said the bank's marketing director, Ming Lin Chen. "We started marketing (in 1992) to Spanish-speaking, African-American and white markets," Chen recalled. "(CRA) compliance was the original motive. Profit never came into our minds until recently."

The bank upped its CRA status to 'satisfactory' at the end of 1992, "but we realized we had to be profitable there too," Chen noted. "There were a lot of government programs we could provide," she said, naming Small Business Administration loans in particular, adding, "we could have a good (interest rate) spread on those, so we could still make a profit."

SBA loans also fit into General Bank's role as a commercial bank.

To further enhance its role as a business lender, General Bank moved its downtown L.A. headquarters last month from 201 S. Figueroa St., near the southern edge of Chinatown, to the heart of downtown's Central Business District -- 800 W. Sixth St.

"We moved to the heart of downtown to cater to more mainstream business," Chen explained. More than 50 percent of General Bank's business lending is now made to non-Chinese customers, Chen said. The bank aims to eventually expand that to 70 or 80-percent.

"We're targeting more business entities. More effort will be concentrated there," she commented. General Bank finances international trade, real estate and general business loans. It has also launched an effort to bring in more business from Fortune 500 companies and government agencies in the last two years. "We've opened about 25 to 30 accounts (with Fortune 500 companies and government agencies) -- some lines of credit, tax deposits and timed certificates of deposit," Chen related. This "wholesale" non-Chinese business is more profitable than its retail efforts out of the community, Chen said.

"We tried to reach non-Koreans, but they weren't interested," declared Hwajin Yoon, Seoul Bank of California's compliance officer. Seoul Bank, based in the Koreatown district of Los Angeles, has temporarily ceased its marketing program to the non-Korean communities.

Seoul Bank's frustration with attempting to break out of its traditional ethnic niche and expand into new markets is not unusual, industry sources pointed out.

"It's very difficult to go into a new market and be successful," commented banking attorney Richard Gibson of Obregon & Gibson. One strategy used to break into a new market has been to buy an existing local bank. "That was the way a lot of Japanese banks did it in the '80s," Gibson noted. "Sometimes it worked very well," he added, pointing to the successful operation of San Francisco-based Union Bank by the Bank of Tokyo.

Tokai Bank Ltd. of Nagoya, Japan went the other route, establishing a Tokai Bank of California from scratch in 1974. While serving mainly as a wholesale business bank, downtown L.A.-based Tokai Bank has both small business clients and individual clients. "Our ethnic (client) mix reflects the diversity of Los Angeles," said marketing director Rian Lidschin. To accommodate this diverse clientele, Tokai Bank offers telephone banking services in English, Spanish, Japanese and the mandarin dialect of Chinese. "When we have a product we feel would work, we go into that community," Lidschin commented. Right now Lidschin said he is looking at advertising a small business loan program in The Sentinel, a local African-American newspaper.

Tokai Bank also has representatives who actively participate and occasionally put on seminars at Chinese, Spanish and African-American chambers of commerce. The bank is particularly active in Hispanic-oriented chambers in the Los Angeles area and Asian-oriented chambers in Northern California, Lidschin said.

Also, Tokai Bank advertises its products in various community publications with, Lidschin noted, "varying degrees of success." His conclusion: "Most of the successful people in commerce read the English-language business press."