WASHINGTON - More banks failed in 1999 than in any of the last four years, and the Federal Deposit Insurance Corp. says 2000 could be even worse.

Seven banks and one thrift have failed in 1999, making this year the agency's worst since 1995. But another 12 institutions, and possibly as many as 22, are expected to fail next year, Frederick S. Selby, the FDIC's finance director, told the agency's board on Tuesday.

The number of banks on the FDIC's "problem" list jumped 11% in the third quarter, to 69; the number of problem thrifts declined by three, to 14.

Agency officials said the institutions they expect to fail are relatively small, with average assets of about $100 million. They predicted the total cost of bank and thrift cleanups would be $100 million for the year that will end Sept. 30, 2000.

But FDIC analysts have been wrong before.

At yearend 1998, agency experts predicted that 1999 bank failures would cost the Bank Insurance Fund just $32 million. In fact, the toll may reach $1 billion. The biggest chunk of that loss has come from the spectacular - and apparently unexpected - failure of First National Bank of Keystone (W.Va.).

"In 1999 we really missed it," an FDIC official confessed.

This year's costs will impose a rare net annual loss on the robust Bank Insurance Fund. Through the first nine months of 1999, the bank fund had a net loss of $113 million. Still, the bank fund's reserves tower at $29.5 billion.

Fraud and risky asset securitization policies have been key themes in 1999's group of failed banks, regulators said. Officials at several institutions are accused of resorting to fraud to hide trouble or enrich themselves. Several community banks, including First National, got in over their heads when asset securitizations went sour.

To arrive at its estimate of 12 bank and thrift failures in 2000, FDIC researchers looked at a variety of factors, including the state of the economy, the number of undercapitalized or otherwise troubled institutions, and various risks to stability.

"We don't see ourselves in the same very, very favorable climate of 1997 and 1998, where we had so few failures," an agency official said.

Agency board members did not comment on the forecast for 2000 failures.

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