The National Clearinghouse Association has lowered its membership capital requirements, setting the stage for further expansion.

On April 11, the Federal Reserve Board approved the association's application to cut the Tier 1 capital requirement for members in half, to $50 million, making about 140 more banks eligible to join the group, which was founded in 1992 and has 65 bank members from 36 holding companies.

"We are on the verge of a very targeted and focused marketing campaign" to persuade the newly. eligible banks to join, said Ned Miltko, administrator of the association and a senior vice president of the consulting firm Littlewood, Shain & Co., of Exton, Pa.

Littlewood, Shain is a partner with Huntington Baneshares and U.S. Check in the Check Exchange System Co., which markets and administers the association.

Members of the association include NationsBank, Chase Manhattan Corp. and Corestates Financial Corp.

The group aims to reduce clearing costs for checks passed between banks in different regions with mandated fee reductions and a net settlement system for interbank funds transfers.

The association has members from every Fed district. But Mr. Miltko said it needs to let in smaller banks to expand into more cities.

One city on the target list is Little Rock, Ark., where First Commercial Bank, with $90 million in Tier 1 Capital, is considering joining, bank officials said.

Criticism from Trade Group The clearing house has been criticized by the Independent Bankers Association of America for excluding community banks.

The smallest bank holding company members of the National Clearinghouse Association - Liberty Bancorp, of Oklahoma City, and National Commerce Bancorp, of Memphis - each have $2.5 billion of assets. Mr. Miltko said.

Viveca Ware, an associate director at the Independent Bankers Association, said that lowering the Tier 1 capital requirement does little to address that concern.

She said that the average community bank has $46 million of assets and $4 million of Tier 1 capital. She added that only 564 of the more than 11,000 banks in the country have more than $50 million of Tier 1 capital.

The clearing house sets minimum capital levels to protect the financial integrity of its net settlement system, figuring that larger banks are better prepared to cover funding shortfalls should a member fail.

Minimum Capital Levels

But Ms. Ware said that she did not believe that the minimum capital levels were needed. Instead, she said that the clearing house could safeguard the system in other ways, such as by requiring sound capital ratios and credit ratings.

Michael CrowIcy, president of the clearing house and a vice president and corporate float manager in Hartford, Conn., for Heet Financial Group, of Providence, R.I. said the clearing house has considered eliminating the capital requirement.

But he added that such a move might do little to boost membership, since few, if any, banks with less than $50 million of Tier 1 capital handle enough checks to warrant joining.

Furthermore, he said that these institutions would be better served by joining local clearing houses.

To this end, the clearing house has formed a committee to encourage community banks to join local clearing houses, and for these groups to merge into statewide associations.

The clearing house is also considering new membership categories, Mr. Miltko said.

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