WASHINGTON - Industry analysts and congressional aides are opening fire on a plan by regulators to eliminate the requirement that banks maintain a minimum level of core capital.

Though the plan hasn't been formally proposed, there is broad agreement among regulators that the so-called leverage ratio will not be needed once risk-based capital rules have been refined to measure banks' interest-rate risks.

Critics charge that the change would amount to forbearance.

"It certainly sounds like you're eliminating what most people thought of as a cornerstone of safety and soundness," said a Senate aide, who asked not to be named.

Greenspan Out Front

Led by Federal Reserve Chairman Alan Greenspan, regulators maintain that if riskbased capital rules accurately reflect a bank's risk, then the backstop measure of core capital becomes unnecessary.

In congressional testimony last week, Mr. Greenspan upped the ante. He asserted that eliminating the leverage ratio would also aid economic recovery by boosting lending.

Some analysts disagree vehemently.

"I think he's trying to justify being optimistic about the economy," said Warren G. Heller, research director of Veribanc Inc., a bank rating service in Wakefield, Mass.

Mr. Heller, who sent a protest letter to Mr. Greenspan and copies to members of the House and Senate banking committees, said there was no evidence that the leverage requirement is restraining bank lending.

"There's still a trillion dollars out there to lend," Mr. Heller said. "Banks could lend a tenth of that and people would be really delighted with what that would do for the economy."

Harsh Criticism of Plan

"This is potentially very dangerous," Dan Brumbaugh, a consultant and persistent critic of regulators, said in congressional testimony last week.

In a telephone interview on Thursday, Mr. Brumbaugh said the government would lose an important buffer against future losses if the leverage ratio is dropped. He said the risk-based capital requirement isn't sufficient by itself.

"I consider this to be highly political," Mr. Brumbaugh said.

"It may in fact increase bank lending, but that may be inappropriate under these conditions."

Mr. Brumbaugh maintains that scrapping the leverage ratio would give weakly capitalized banks more incentive to take risks.

"Since it's set at only 3%, it's not as though it's a terribly strict requirement," he said.

Regulatory Heads in Favor

The idea has been percolating quietly for months. Several regulators - including Boston Fed President Richard Syron and Office of Thrift Supervision Director T. Timothy Ryan - have aggressively pushed the idea in speeches.

It got scant attention until Fed Chairman Alan Greenspan endorsed it in congressional testimony last week. "It's a recognition of the fact that it's a hot button with Congress," said James McLaughlin, director of agency relations for the American Bankers Association, which favors the change.

"If you've got a system which has capital requirements rising or falling depending on risk, then you've got sufficient capital for the risk the institution is facing," Mr. McLaughlin said.

Risk-Based Called Complicated

But some small bankers have reservations. They like core capital because it's easy to calculate, and would prefer to be exempted from risk-based capital.

"Look at all the work you're going to put them through so they can calculate this ratio," said Diane Casey, executive director of the Independent Bankers Association of America. "They're probably going to exceed it anyway."

"The leverage ratio has an advantage," Mr. Heller said. "It's very intuitive, easy to understand, and easy to explain."

The 1991 banking law gave regulators authority to scrap the leverage ratio - provided they make a joint finding that it is no longer necessary to ensure safety and soundness.

"If anything goes wrong, their heads are on the block," said a congressional staff member.

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