Federal regulatory agencies will henceforth take financial institutions' lending activities in low and moderate income neighbourhoods into account when ruling on applications for insurance, expansion or mergers. Banks and savings and loan association will be "encouraged, but not required" to offer particular kinds or amounts of credit.

The proposed change, to become effective Nov. 6, is designed to end redlining and make the Community Reinvestment Act of 1977 effective.In assessing the records of banks and thrift associations, four government regulators - the Comptroller of the Currency, Federal Deposit Insurance Corp., Federal Home Loan Bank Board and Federal Reserve Board - will consider the following factors:

Whether the institution has ascertained the credit needs of the community and consulted with community leaders.

What special marketing programs and services have been established to make people aware of credit services offered.

The extent of the institution's participation in government-sponsored local community development projects, subsidized housing and small business programs.

Geographic distribution of loans and loans to existing as well as new community residents.

Evidence of discouragement of application for certain loans, plus an institution's history of discriminatory or illegal credit practices.

It is left to each institution to prepare a CRA statement outlining its loan tion suggests lenders use counties, program. So is the definition of "com-Standard Metropolitan Statistical Areas, or their "effective lending territories."

An SMSA usually includes the city and the suburbs, while the term "effective lending territories" has no accepted delineation. Critics.