Banks will have to reduce their holdings of loans if they are to maximize profits, a panel of leading international bankers said Tuesday at the International Monetary Conference.

"Regulated intermediaries are not the most logical holders of financial assets," said Douglas A. Warner 3d, chairman and chief executive officer of J.P. Morgan & Co., who led a panel discussion on the credit business.

Mr. Warner, who spoke to reporters after the closed-door session, said banks are at a historic crossroads as they evaluate the profitability of their traditional lending business. Increasingly, he said, banks can create value for shareholders by originating and structuring credits, bundling and unbundling risk, providing research, and handling trades-but not holding credits.

Mr. Warner, who has long championed a transformation of the credit business, acknowledged that banks are far from reaching a consensus on precisely what that means. But he said he expects to see "huge changes" in the years ahead.

J.P. Morgan is well along in its transformation from a loan holder to a creator and distributor of loans. It has reduced its regulatory capital needs by 50% over two years. By the end of last year, Mr. Warner said, that program resulted in a 20% reduction in loans held on Morgan's books and a 33% reduction in the amount of capital devoted to its credit business. "We are ahead of pace," Mr. Warner said, "and it was cheaper than we thought it would be."

Like Mr. Warner, most of the panelists represented giant global banks, which face different challenges than smaller banks. Global bank customers tend to be huge corporations and governments that can choose from a wide array of financing, from loans to issuing stocks and bonds. They can shop the world for the best deals. The global banks must compete in that highly competitive market.

The panel's consensus may not apply directly to smaller banks that can charge relatively high rates on loans to midsize and small companies.

But as the overall markets become more sophisticated, regional banks may face similar problems, analysts said.

Prominent in the panel's discussion were the newly proposed revisions to the Basel Accord of 1988, which established uniform risk-based capital requirements for banks in developed nations. The latest round of changes, which are expected to be debated for much of the next year, are aimed at fine-tuning measures of credit risk. If the new regulations demand higher levels of risk-based capital, it would make holding loans more expensive for bankers.

"Our goal and our challenge is to develop a system that is flexible and forward-looking, and that provides for a useful and rational assessment of risk on which to base a capital charge," Comptroller of the Currency John D. Hawke Jr. said in a speech to the gathering of about 100 bankers.

From the European side, Jacob Wallenberg, chairman of SEC Skandinaviska Enskilda Banken of Stockholm, said capital-intensive credit activities are destroying value in most European banks. He said nearly half of total global lending volume is on the books of European banks, compared with 22% in Japan and 16% in the United States. Yet the top 15 European banks had a pretax return on equity of 17% in 1997, compared with 24% for the top 15 U.S. banks.

He said this shows how the more developed securitization market in the United States is "fundamentally more cost-efficient than traditional lending."

Mr. Wallenberg urged European banks to work together to develop better pricing models, become more adept at credit risk management, and encourage the development of a broader secondary market on the Continent. "The speed of change would be much higher if key stakeholders cooperated, just as they did in the U.S."

Other panelists provided perspective on how nonbank financial companies have used securitization to their advantage.

Keith W. Hughes, chairman and chief executive officer of Associates First Capital Corp. in Dallas, said securitizing virtually all its loans has helped his company "manage through the issues of profitability and growth."

But he objected to the suggestion that one of his company's advantages is that it is lightly regulated. "We don't think we are free of regulation in any sense," Mr. Hughes said. Rather, he said, the company's strength is its specialization in consumer finance.

Investment bank Credit Suisse First Boston, began paring back its holdings of credit in January 1997, and reduced its capital devoted to its credit business by 43% by the end of that year, and 77% by the end of 1998.

In a presentation for conference attendees, Allen D. Wheat, chairman and chief executive officer of Credit Suisse First Boston, said the reduction benefited shareholders by creating an estimated $5 billion in additional market value.

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