Federal regulators on Monday insisted they are equipped to oversee the new breed of jumbo banks.

Their predecessors were not so sure.

"I doubt regulators are ready at this point to supervise Citigroup or these latest institutions," said L. William Seidman, former Federal Deposit Insurance Corp. chairman. "It's a matter of preparing for increased complexity. They've got to develop expertise to evaluate systems and sensitivity models."

"This is a tremendous challenge," agreed Jo Ann S. Barefoot, another former supervisor who is now a partner at the consulting firm KPMG Barefoot Marrinan. "This will have regulators scrambling."

Ready or not, the megabanks keep coming.

On Monday, NationsBank Corp. and BankAmerica Corp. said they would combine to create a $570 billion-asset institution, while Banc One Corp. and First Chicago NBD Corp. said their merger would result in a $279 billion-asset company. Those two deals follow last week's stunning news that Citicorp and Travelers Group would combine to create a $698 billion- asset institution.

Four of the industry's largest deals are pending. The size of the banks being put together today eclipses anything regulators have had to handle. Once these mergers are complete, assets held by the five largest banks will total $2.1 trillion. Five years ago, the top five had $753 billion of assets.

Regulators, however, insisted Monday that they are prepared for the era of megabanks. "We see this as a big challenge," said J. Alfred Broaddus Jr., president of the Federal Reserve Bank of Richmond, which supervises NationsBank. "But I am confident we can meet that challenge. We need to execute our approach very carefully."

The agencies' relatively new "supervision by risk" program will play a key role, said Emory Wayne Rushton, senior deputy comptroller for bank supervision policy at the Office of the Comptroller of the Currency. Under the program, examiners zero in on parts of a bank most likely to cause a loss.

"This was one of the main reasons for going to risk-based exams," he said. "We had to get away from specific check-list approach to banking supervision."

Examiners will review how the giant banks collect, distribute, and analyze data about their operations, he said. If examiners detect trouble in one of these areas, they will delve further, he said.

The Comptroller's Office also restructured last year, transferring oversight of the 32 largest banks from regional offices to Washington. Mr. Rushton said this will let the agency keep tabs on the big banks, regardless of how many states they operate in.

Eugene A. Ludwig, who ended his five-year term as comptroller this month, said there are benefits to size, such as risk diversification. "Although this is large, it is just a plain-vanilla bank merger," he said of the NationsBank/BankAmerica deal.

But former regulators questioned whether these banks would be too big to effectively supervise.

Paul G. Fritts, a St. Louis-based consultant and former executive director of supervision at the FDIC, said it will be impossible for regulators to find problems until they are relatively large.

"Even at $200 billion (of assets) it's difficult," he said. At "$500 billion, it's impossible."

Mr. Seidman said regulators will be forced to defer more to the scores of analysts who feed the market's assessment of these companies.

The readiness of regulators elicited concern on Capitol Hill Monday. Rep. Marge Roukema, chairwoman of House Banking's financial institutions subcommittee, said she may hold hearings on the risks to taxpayers posed by megabanks mergers.

"The scope is far beyond anything we have had to address up until now," the New Jersey Republican said.

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