SAN FRANCISCO -- Federal Deposit Insurance Corp. officials said on Thursday that safety and soundness ratings of California banks continue to decline.

George J. Masa, supervision director for the FDIC's western region, said at a press conference that California's slumping economy and troubled commercial real estate market have boosted the number of banks in the bottom three categories of the five-point Camel rating system.

The trend is more pronounced in Southern California than elsewhere in the state.

He added, however, that the rate of increase in banks rated as three, four, and five "seems to be slowing down. Whether we are at a leveling-off point is difficult to say."

Increase in Failures

The FDIC officials noted that bank failures are rising in the Golden State, but declined to forecast whether the trend will continue.

"We've already had 10 failures in California in 1992, compared to four in 1991, and four in 1990," said Michael J. Paulson, western regional director of resolutions. "We invite you to draw your own conclusions."

Meanwhile, agency officials said they have yet to see signs of recovery in commercial real estate, especially in Southern California.

Mr. Masa said the agency has already received requests to waive a new rule requiring banks to limit or eliminate use of brokered deposits bought on the wholesale market.

But he said it was too soon to predict how many banks will be in violation of the rule when it is fully phased in in August.

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