WASHINGTON - The banking industry's eight-year run of record earnings is threatened this year as declining credit quality, reflected most prominently in the pending Shared National Credit Review, forces banks to divert earnings into loan-loss reserve accounts.

"This is the year that banks start adding to the reserve," said Lawrence W. Cohn, director of research at Ryan, Beck & Co. of Livingston, N.J. "That will have a fairly adverse impact on earnings." The industry's average reserves are at a 13-year low of $1.68 for every $100 of loans outstanding, the Federal Deposit Insurance Corp. announced Monday.

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