Eugene A. Ludwig, the comptroller of the currency, is right on the mark in his warnings about credit quality, bankers said Monday.

"Mr. Ludwig's remarks are quite in line with the trends and issues we have detected from our membership," said Martin "Dev" Strischek, president of Robert Morris Associates, a trade group representing lenders, that recently has sounded similar alarms.

Mr. Ludwig said over the weekend that credit standards are slipping - and announced he was forming a panel to investigate the situation.

Although some bankers warned that an overreaction by regulators could needlessly restrict credit, many pointed to signs of potential problems in the syndicated loan market and in the credit card business.

They blamed rising competition for the looser standards.

"We're all looking for loan volume and loan growth," said Mr. Strischek. "To get those numbers in the process of negotiation, we find ourselves giving up some of the things we would rather not."

Specifically, Mr. Strischek said that banks were settling for more limited guarantees, lower debt service coverage ratios, and longer amortizations. Competition, however, has prevented the banks from pricing the credits appropriately.

"With the interest rate climate, there is more incentive for banks across the board to reach out and make loans," said Kenneth Guenther, executive vice president of the Independent Bankers Association of America. "It is no longer possible to make the fairly easy returns of years past.

Bankers have expressed concern that a potentially weakening economy will make it difficult to work out loans that are less than rock-solid.

"Have standards deteriorated so borrowers can get into significantly more difficulty as a result of the next downturn before banks can take action? Yes," said David L. Eyles, chairman of RMA's agency relations and research unit and chief credit policy officer of Shawmut National Corp.

Bankers said that problems have been looming more conspicuously in the large corporate credits than in middle-market lending - and the regulators have been following the situation closely.

"The OCC has interviewed me no less than six times in the last eight months," said one loan syndicator.

Up to this point, this banker continued, defaults haven't been a problem, particularly in the investment-grade credits.

"In leveraged lending, where the default probability is much higher, a big change in the economy will make a difference," he said, adding that longer-term loans might create problems in a weakening economy.

Nonetheless, the returns on syndicated loans should not be looked at in a vacuum, said another lender. Many banks offer the loans as a part of a package that includes securities and derivatives services. "The actual return on a given loan is only part of the puzzle. What may appear to be a marginal, low return on a given transaction may be a positive contribution to an overall relationship."

Additionally, more banks are using portfolio management, which keeps down their exposure to any one loan lower and diversifies their risk.

Citicorp has lost some of its syndicated lending business to competitive pricing but does not consider it a total loss, because "lending is only one portion of our business," said Rod Ballek, managing director responsible for Citicorp's North American portfolio.

Syndicated credits are not the only ones attracting attention.

The quality of home equity loans at most banks remains high, according to industry observers, but that could be changing. Banks are inching their way into home equity loans to people with damaged credit, where the potential for credit losses is higher.

At First National Bank of Chicago, which originates mostly high quality home equity loans, only one second mortgage has gone bad in the last four months. But the unit of First Chicago Corp. is now considering a more dramatic move into impaired credit.

"Other banks have gone that route," said Peter J. Reed, head of consumer lending. "That has been something that is becoming much more common than it was before."

Some lenders agreed with Mr. Ludwig that credit card delinquencies could become a problem, although they insisted that the big players have had the expertise to avoid problem customers.

"There is an inevitable cyclicality in this industry," said Scott Marks, an executive vice president at First Chicago Corp. "Most participants saw early signs of the improving trend bottoming out," by the fourth quarter.

The OCC's national credit committee is expected to push examiners to study the pricing of loans and the use of exceptions to credit standards. It will also scrutinize compensation policies and credit concentrations.

"It is good they are setting up a commission, but let's not overreact," said James Chessen, chief economist for the American Bankers Association.

"There is a delicate balance," he said. "I worry that this will turn into another witch hunt by the regulators to find problems that may not be there."

"Underwriting standards should change as the economy changes," Mr. Chessen noted. But that said, "I would hope the regulators don't jump to conclusions. If the bar is always high and can never come down as credit conditions change, then the result is restricted credit, inappropriately."

"I would hope that they would be very balanced as they seek to determine whether underwriting standards have slipped," said Thomas F. Ripke, Jr., a chief credit administrator at West One Bank in Boise, Idaho, and RMA's first vice president.

Asked whether the OCC might cause a credit crunch, the IBAA's Mr. Guenther said, "You have got to give Mr. Ludwig the benefit of the doubt, and he is seeing the emergence of such problems at your larger banks."

Stephen Kleege, Robyn Meredith, and Jonathan S. Hornblass contributed to this article.

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