A news conference is scheduled for Wednesday to announce the banks' adoption of the so-called "Equator Principles" drafted by the International Finance Corp., the private sector arm of the World Bank, the sources said.

According to the agreement, a copy of which was provided to Reuters, the banks agree, "not (to) provide loans directly to projects where the borrower will not or is unable to comply with our environmental and social policies and processes."

The Equator Principles classify projects according to their affect on the environment - including wetlands, forests and other natural habitats - or various ethnic minorities or culturally significant sites. They then set procedures or communications that prospective borrowers must follow.

In the first quarter of 2003, Citigroup, WestLB and Barclays were among the top 20 banks tapped to arrange project finance loans worldwide. Combined, they handled $1.4 billion, or 10.2 percent, of a $13.8 billion loan market, according to Dealogic LLC.

OPPOSITION

Opposition to the new guidelines is coming from the Rainforest Action Network. In April, the San Francisco-based group briefly ran television advertisements featuring Susan Sarandon, Ed Asner and other actors, criticizing Citigroup's environmental practices.

"The concern is the loopholes" in the principles, said Ilyse Hogue, the group's global finance campaign director, in an interview. "We're not seeing the most ecologically endangered areas pulled off limits for investment and mega-development projects."

She also said the Equator Principles lack a built-in mechanism for banks to monitor borrowers' practices.

Hans van Zom, an ABN spokesman, said: "For many years, we have already adopted the World Bank and IFC social and environmental standards. We will develop further sustainable policies."

A WestLB spokesman declined to comment. Citigroup was not immediately available for comment. Barclays did not immediately return calls seeking comment. (Additional reporting by Sophy Tonder in London.).