Chase Manhattan Bank became the first bank to get in line to issue a new hybrid preferred security that is being touted on Wall Street as an inexpensive way to raise regulatory capital.

The unit of Chase Manhattan Corp. filed with the Securities and Exchange Commission Monday to issue $1 million of quarterly income preferred securities - a first step toward filing for a much larger issue.

"The filing will be amended and the size will be determined over the next few weeks," said Don Taggart, a senior vice president at the bank who worked on the deal. "The market expects up to $500 million."

Market sources said the Chase filing likely would begin a flood of similar programs, as banks take advantage of a Federal Reserve ruling last week that they could use the tax-advantaged instruments to raise Tier 1 capital.

Although capitalization is not a major issue for most banks, the new securities will be used to replace more expensive preferred stock issues, Mr. Taggart said.

Traders estimated banks would file in the next few weeks to issue up to $10 billion of the securities. Indeed, some observers expressed concern that an oversupply could affect pricing.

"We have already begun to see a widening of spreads in the new-issue market" as it "begins to anticipate upcoming supply," said Rick Schwartz, a principal at Morgan Stanley & Co.

BankAmerica Corp., Wells Fargo & Co., and NationsBank Corp. are said to be planning to file to issue up to $500 million apiece, and Mellon Bank Corp. is said to be planning a filing for $300 million.

"I expect there will be a lot of filings right away and that backlog will take some time to work itself into the market." said Roger Pugh, assistant director of division of banking supervision and regulation within the Federal Reserve. "More than a dozen banks have talked to the Reserve bank about this structure."

Because preferred shareholders can sue the entity issuing shares over unpaid dividends after five years, regulators had been concerned that the proceeds offered too little protection against loss to be counted as Tier 1 capital.

But regulators noted that banks seldom, if ever, suspend dividends long enough to make shareholder lawsuits a real danger. Mr. Pugh added that regulators recognized that it was unfair that other industries, including insurance companies, were allowed to count the securities toward capital.

Goldman, Sachs & Co. - which created a version of the security known as Quips - was lead underwriter on the Chase issue. Merrill Lynch & Co. offers a similar product under the acronym TOPRS, for Trust Originated Preferred Securities.

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