WASHINGTON -- The head of one of the country's largest banks said Thursday that his biggest challenge is getting employees to "think small."

First Union chairman and chief executive Edward E. Crutchfield Jr. said his chief worry is that his 33,00-employee bank based in Charlotte, N.C., could become "just another big bureaucratic, unresponsive, cold-fish kind of company."

"I started worrying about the problem of bigness when First Union startedd our rapid interstate expansion eight years ago," Mr. Crutchfield told a banking conference here. "That's still my chief worry today."

Rapid Growth

First Union has grown tenfold in the last eight years to $72 billion in assets. The bank has 1,300 branches in Florida, Georgia, North Carolina, South Carolina, Virginia, Tennessee, and Maryland.

Some bank examiners at the Federal Deposit Insurance Corp. are worried about First Union's bigness too, but not for the same reasons as Mr. Crutchfield. They want to investigate whether the rapid growth in assets has caused quality problems

Recently the FDIC examiners requested permission to enter the national bank to look at its records. The FDIC's own board vetoed the request under a new policy designed to eliminate duplicative exams. The bank is already examined by the Comptroller of the Currency.

"I don't think there is going to be a backup exam," Mr. Crutchfield said in an interview following his speech.

Concern About Customers

Mr. Crutchfield in a speech to the American Institute of Certified Public Accountants said what he fears is that the bigger First Union gets, the less effective it will be at meeting customers' needs.

Companies that ignore their customers quickly rack up massive losses, he said, noting IBM, General Motors, and Sears as examples.

"We've got to give the customer what he wants. We're not doing that," he said.

First Union had $485 million in profits lastyear, and analysts project it will earn close to $800 million in 1993, Mr. Crutchfield said. Nonetheless, he's concerned because companies like Merrill Lynch, General Electric Capital Services, and Fidelity are taking away bank customers.

Mr. Crutchfield acknowledged that he was wrong several years ago when he dismissed mutual funds as marginally profitable products that would do little more than suck deposits out of the bank.

"We did not have what they wanted when they wanted it, so they went to somebody who did," he said. "We're losing just as many customes on the loan side."

But Mr. Crutchfield wants to use the third-largest branch network in the nation to turn this situation around. First Union has launched a massive training program to prepare employees to sell investment products.

By fall 1994, Mr. Crutchfield wants an average of two people in his 1,300 branches licensed to sell mutual funds.

Surpassing Merrill Lynch

"We'll have more registered sales reps in the Southeast than Merrill Lynch," he said. "In effect we're drawing a line in the dirt and saying to those who have been stealing our best customers: 'No more. You will take no more of our customers.'"

First Union bought its own mutual fund company last month, Lieber & Co.

"Why should we feed the bear that's eating us? I'd rather buy a bear than feed one."

First Union will offer 28 different funds. Its mutual fund assets total $7 billion.

"The biggest risk is sitting on our hands and continuing to watch our best customers walk out the door," he said. "If we don't change quickly enough and boldly enough, the bureaucracy will kill us."

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