WASHINGTON -- The Federal Deposit Insurance Corp. has launched an intensive effort to attract buyers for New England banks and thrifts that are on the verge of failure.

In a sign that investor interest is indeed picking up, more than 300 prospective bidders -- including officials from 100 banks - turned out last week for a private meeting held by the FDIC in Boston.

"We got banks to attend that have never gone to a bidders' conference," said Paul Driscoll, Boston regional manager of the FDIC's division of resolutions.

Among those attending: representatives of Chase Manhattan Corp., Fleet Financial Group, Bank of Boston, Canadian Imperial Bank of Commerce, and Royal Bank of Canada.

The marketing effort suggests that seizures of trouble institutions in the region are about to increase. The agency did not discuss the names of specific institutions that would be put up for sales, but indicated that many would be coming on the block soon, according to people who attended the meeting.

Courtship

The FDIC is trying to catch the New England market as it begins to turn around. The agency is hoping that buyers, already awash in liquidity, will want to acquire the assets of failed banks. In the past, investors have bought deposits but often spurned the assets.

The FDIC's sales pitch indicates that the agency expects to see brisk competition for the assets. Prospective investors were told that the upcoming deals would be patterned on the sale last fall of Southeast Bank of Miami to First Union Corp., in which the FDIC bore 85% of losses for five years. The FDIC wants to structure the New England deals with an 80%-20% split.

This so called loss-sharing arrangement is less attractive for investors than the FDIC's traditional method, which has covered all losses for three years or more.

The FDIC is focusing on New England "because that's where we see our near-term resolution challenge," said Robert H. Hartheimer, associate director of FDIC's division of resolutions. He said the FDIC may take a similar approach in California and New York.

Officials have expressed mounting concern about the condition of the New England's FDIC-insured savings banks. Of 326 savings banks, 127 lost money in 1991 and 18 failed. Of 441 savings banks nationwide, 72, mainly in the Northeast, were on the FDIC problem list at yearend.

FDIC officials said in interviews that the pool of potential buyers in New England has been shrinking for some time. To reverse the trend, the FDIC is trying to allay bankers' misgivings about doing business with the agency.

"There's a fear that, 'I don't want someone else's [problem] asset,'" Mr. Hartheimer said. "But if we can get them to understand how the FDIC can minimize the risk, it's to everyone's advantage."

In some cases, the FDIC might extend additional protection - covering perhaps 90% of losses after the initial five years, with the acquirer absorbing the remaining 10%.

The Profitability Incentive

The aim is to let bankers, not FDIC officials, manage assets in a way that prevents a rapid decline in value, and to give the banks a strong incentive to return the asset to profitability.

Banks would not have the right to put the assets back to the FDIC, but the FDIC would protect them against catastrophic losses.

Mr. Driscoll said the size of the crowd that packed the auditorium at the Federal Reserve Bank of Boston last week points clearly to renewed interest in acquisitions.

"It's a time when a bank can grab market share for a real cheap premium," he said.

Awash in Liquidity

One reason for the brisk interest: After a long period of down-sizing, New England banks are awash in liquidity, and are regaining their appetite for assets. But loan demand remains slack.

"We need the assets," said William G. Thompson, executive vice president of Liberty Bank, Middletown, Conn. "If we buy a bank and we take only the deposits, it's great. Now what do we do with the cash?"

Mr. Thompson's $1 billion-asset bank has submitted bids to the FDIC six times, but has most often come in second. He said he will adjust future bids to the loss-sharing arrangements outlined by FDIC officials.

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