WASHINGTON - Despite double-digit loan growth in the first half, two government reports show bank credit quality remains strong.

Industry observers attributed the paradox to intense jawboning from regulators, the strength of economy, and nightmares from the last recession.

"Bankers' memories are not that short," said James D. McLaughlin, director of regulatory affairs at the American Bankers Association. "They remember what happened a few years ago. As a result, they are looking at credit quality and listening to the regulators' cautions."

Comptroller of the Currency Eugene A. Ludwig, Federal Reserve Chairman Alan Greenspan, and FDIC Chairman Ricki Helfer all have warned bankers against lowering credit standards.

In a report released Wednesday, the Fed said "no deteriorations in credit quality are noted," even though commercial credit demand has continued to bloom nationwide.

The Fed's findings, contained in the Beige Book, a periodic review of the nation's economic conditions, follow a report Tuesday by the Federal Deposit Insurance Corp. The FDIC said total bank lending increased 12.5% to $2.5 trillion in the second quarter. Loans grew 12.1% in the first quarter.

The FDIC also noted a continued decline in troubled assets at banks, which have fallen to 0.94% of total assets from 1.27% a year ago and 3.24% four years ago.

Bert Ely, president of the industry consulting firm Ely & Co., said the falling interest rate environment also helped.

Lower rates reduced monthly interest costs, making it easier for borrowers to qualify for loans. "People have a better ratio of income to debt, so they look better from a credit quality standpoint," he said.

The economy also continues to grow, ensuring that borrowers keep their jobs and are able to pay their debts, said Karen Shaw-Petrou, president of the industry consulting firm ISD/Shaw Inc. "A robust economy supports even fragile loans," Ms. Petrou said.

Lenders, too, have become more savvy, said Nicholas Perna, chief economist at Shawmut National Bank.

"There is a lot more attention being paid to asking the right questions and getting the right documents," he said. "The old days of doing it over a handshake led to some problems when things got tough."

Despite the good news, bankers aren't expected to lower their guard.

James Bills, a vice president and economist at Comerica Bank, said personal bankruptcies and loan delinquencies are rising in his area. These often provide early warnings of credit quality problems, he said.

Increasing consumer debt loads also are a worry, Mr. Ely said. "I am concerned that we have a significant minority in the population who are stretching things out for all they are worth," he said. "If we get a downturn in the economy, we will see an upswing in credit quality problems."

But according to the Beige Book, an economic downturn remains far away. Surveys of Fed researchers through Sept. 5 concluded that the economy continues to improve, with few signs of inflation on the horizon.

Industrial price pressures "appear to be relatively minimal" and consumer prices increases "are somewhat restrained," the Fed said.

Employment prospects also are looking up, and industrial production and new construction are rebounding.

"This was a pretty good report," said David A. Lereah, chief economist at the Mortgage Bankers Association. "Price pressures are relatively tame, which is good news because it means inflation is not building up and the Fed doesn't have to tighten. It means the Fed can stay neutral or can have an excuse to ease."

The central bank's Federal Open Market Committee will consider the report when it debates interest rate policy at its Sept. 26 meeting.

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