slightly at some of the largest national banks, according to a survey released Wednesday by the Office of the Comptroller of the Currency. The primary easing was reported in home equity lending, followed by such indirect consumer loans as auto loans bought by banks. The survey, by the OCC's senior examiners, was the first of its kind and officials said they are still analyzing the results. Susan Krause, senior deputy comptroller for bank supervision, said she is concerned that the results are an early warning that credit standards have begun to slip. The slide in consumer loan standards is "certainly more a concern than it is good news," she said Wednesday. The survey comes in the wake of other data showing that consumer delinquencies have been on the rise for three consecutive quarters. However, Ms. Krause said the survey hasn't set off alarm bells at the agency. "The declines were not significant enough to issue new policies to banks or examiners," she said. Moreover, Ms. Krause acknowledged that the results reflect the end of the credit crunch and a sign that banks are making more money available to the economy. "Much of this seems to be a correction, a part of getting back to normal lending," she said. "This is more than just a correction or recovery from the credit crunch, " she said. "But it's not serious enough yet to raise too many supervisory hackles." The agency asked examiners who supervise the 40 largest national banks to compare loan underwriting policies in May 1995 to those used by the institutions a year earlier. Home equity loans topped the list of areas where credit standards dropped. Underwriting standards for home equity loans "eased somewhat" at about half the banks surveyed, the examiners reported. Indirect consumer loans - such as auto loans bought by banks - came in second, with a third of the banks showing signs of lower standards. Jim Chessen, chief economist at the American Bankers Association, said he wasn't surprised that home equity lending is the primary area in which banks have eased up. "Home equity loans are the least risky of consumer loans, so it is natural that there would be a tremendous amount of competition in that area," Mr. Chessen said. Only 0.75% of home equity loans were delinquent at the end of the second quarter, he added. However, the survey said several examiners were concerned about how recent loan growth and easing of loan terms would affect banks' portfolios in the next economic downturn. "I read this as a message to the industry that there's no need to panic, but bankers need to be vigilant," said Al Sanborn, president and chief executive of Robert Morris Associates. "The loans we are booking today will be on the books when the next recession occurs, so now's the time to think of that." At the banks that showed slippage in lending standards, the primary reason cited for the change was increasingly tough competition, the survey said. The examiners also reported that the banks had adequate systems to approve and report to senior management individual exceptions to loan underwriting policy. However, examiners were concerned that many of the banks didn't have an adequate method for monitoring the overall number of exceptions. "A good credit risk management system should have an exception tracking system, so senior management and the board can know exactly how many exceptions there are," Ms. Krause said. "This is something we will to continue to watch." In all but one of the banks surveyed, examiners rated the independence of banks' loan review process as "adequate." All but one of the banks had effective systems in place to monitor and identify concentrations of credit, the survey found. When asked to identify the banks' largest concentrations of credit, examiners most frequently cited the general categories of real estate, finance, manufacturing, and agricultural loans.

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