A trend toward tighter lending standards at the end of 2000 has reduced credit-quality concerns but has also slowed loan growth, the Federal Reserve Board reported Wednesday in its latest Beige Book survey of economic conditions.

One banker surveyed by the Fed said many of the loans his bank made a year ago "would have zero chance of being approved now." And tighter credit appears to be the rule even in cities that continue to have brisk economic growth, such as Houston.

"Internally, we're being more cautious about credit selection," said Manuel J. Mehos, chief executive officer of $3.1 billion-asset Coastal Bancorp. "We're less apt to do something out-of-the-box, that has some uncertainty … It's not necessarily a credit contraction, but we're being more methodical and conservative."

The combination of tighter lending standards and slowing demand means banks are unlikely to extend the string of record annual profits that they have enjoyed since 1993. But Keith Leggett, chief economist for the American Bankers Association, said the decline in profits probably would not be too severe.

"This is not like the early 1990s, when banks experienced serious capital problems," he said. "In general, they are still willing to lend. Loans will continue to grow, only not as robustly as they did in the past."

The Fed issues a Beige Book report every six weeks, before meetings of its Federal Open Markets Committee. This report's one bright spot concerns debt refinancings, which most observers expect to increase because of lower interest rates. But that forecast contrasts with reports from most districts that demand for commercial and industrial loans has declined.

St. Louis was a case in point. Officials there described demand for these loans as "stagnant."

The Federal Open Market Committee, the central bank's monetary policy panel, considers the Beige Book's contents when making interest rate decisions. The committee next meets Jan. 30 and Jan. 31. The committee last adjusted interest rates Jan. 3, lowering its target for the federal funds rate to 6%.

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