Warning of a regulatory crackdown, Federal Deposit Insurance Corp. Chairman Donna A. Tanoue on Tuesday highlighted three critical aspects of subprime lending that are under scrutiny by examiners.

In a fiery speech at the America's Community Bankers convention in Orlando, Ms. Tanoue said institutions making subprime loans must have tough underwriting standards, adequate reserves for losses, and higher-than-average capital ratios. FDIC examiners will take supervisory action if bankers ignore any of those three elements, she said.

"Those of you who were in the savings industry in the 1980s remember that unexpected losses can be sudden," Ms. Tanoue said. "I believe thrifts and banks with high concentrations of subprime loans should be required to hold more capital than the current rules now dictate -- a lot more."

The institutions deemed riskiest could be forced to hold "several times" their current capital requirements, according to the FDIC chief.

Ms. Tanoue first proposed regulatory changes to reflect the hazards of subprime lending -- high-rate loans to borrowers with tainted credit histories -- in a speech last month. On Tuesday she said specific recommendations will be sent to other regulatory agencies by this month so an industrywide proposal can be hammered out.

"Subprime lending is giving financial institution regulators much to think about, and to act on," she said.

Ms. Tanoue said that the FDIC's recommendations will include a specific definition of subprime lending that excludes most loans made for community development. She said the FDIC does not want to penalize banks for using unconventional underwriting standards to approve loans to first-time homebuyers or to moderate-income people with limited credit histories.

"We do not define those to be subprime loans, nor do we wish to impede the ability of a financial institution to serve its entire community in a safe and sound matter," she said.

The number of institutions affected by any crackdown could be relatively small. Ms. Tanoue said that only about 150 banks and thrifts nationwide have subprime portfolios that exceed 20% of their capital. But nearly 20% of the 70 institutions with the lowest Camels ratings, a 4 or 5, have large subprime portfolios.

Though subprime activities always have been viewed as inherently more risky than other lending, regulatory concern has intensified since the failures of two banks heavily involved in the business: $1.1 billion-asset First National Bank of Keystone, W.Va., in September, and $314 million-asset BestBank of Boulder, Colo., in July 1998. The FDIC has said it could cost as much as $750 million to clean up First National.

Ms. Tanoue said her goal is to give examiners the power to minimize the danger of subprime lending.

Reaction among bankers to her plans was mixed. E. Lee Beard, president and chief executive officer of $571 million-asset First Federal Bank in Hazleton, Pa., and the outgoing ACB chairman, said it is "very important that these issues are addressed because some people do tend to fall asleep at the switch."

But Mark K. Mason, president and CEO of $3 billion-asset Bank Plus Corp., said he does not believe capital levels should be determined simply by the makeup of a bank's loan portfolio.

"The quality of the management of those assets should be considered as well," said Mr. Mason, who was reached at his office in Los Angeles. "There is no question there is more risk in subprime assets, but there are also some very good subprime originators who know what they are doing."

Mr. Mason rejected the idea that a concentration of subprime assets is a warning sign of failure. "Many failures happen at banks that deal with prime assets," he said. "Often it is poor management and changing economic conditions, and not subprime assets, that cause bank failures."

Alan Kline contributed to this report from Orlando.

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