LOS ANGELES - Banking regulators got a tongue-lashing this week from real estate developers and small-business owners who said they were suffering from a lack of credit.

The regulators sought to be sympathetic but made it clear that stiff banking regulations are here to stay.

"The go-go days of the '80s are over," said Timothy Ryan, director of the Office of Thrift Supervision.

Public Hearing Held

Mr. Ryan spoke after a three-hour public hearing in Los Angeles, part of an effort by the Treasury Department and financial regulators to exchange views on credit availability and bank regulation.

Large commercial property developers, medium-size home builders, and even a businessman whose company prepares lawyers for bar examinations detailed the problems they have had in obtaining credit.

The real estate developers complained that banks won't lend to them because of the high reserve coverage needed for these loans - an unjustified policy, they said, because many of these loans are still good.

John LaWare, a Federal Reserve Board governor, disagreed.

"The punitive losses in the banking industry in recent years have been in commercial real estate, ergo the 100%" required reserve cover, Mr. LaWare said.

California, particularly the southern part of the state, is glutted with office buildings built in recent years with vacancy rates of 15% to 20%.

Mr. LaWare did agree with a recommendation from several midsize home builders that a distinction should be made between commercial and residential loans when assessing credit risk.

"Residential loans are smaller in terms of number and dollar amount, so it is appropriate that [the reserve cover] be half of what it is for commercial loans," he said.

Examiners Blamed

Borrowers said banks had become gun-shy because of the heavy hand of examiners.

"We do need a more flexible approach to new regulations, and we need to avoid |micromanagement' by examiners," said Richard Barkhurst, chief credit officer at First Interstate Bank of California.

Mr. Ryan said a series of similar meetings for regulators, bankers, and business people will be held through the end of the year.

The OTS chief said regulators are compiling rules that will form the cornerstone of industry oversight and want as much input as possible before implementing them.

New Guidelines Due

He noted that in two weeks, new real estate lending guidelines for banks should be completed. He said the guidelines should not result in any new charges against earnings.

"There has been confusion in the ranks because of all the changes," Mr. Ryan said of rules that have been imposed since the thrift crisis. He said they confusion led to fear, which in turn spawned conservative lending practices.

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