WASHINGTON - Despite Comptroller Eugene A. Ludwig's comments Monday that draft Community Reinvestment Act exam procedures are being junked, parts of the controversial guidelines are expected to survive.

The factors examiners will to use to evaluate a bank's compliance with CRA will undergo some tweaking, but Steve Cross, deputy comptroller for compliance, said the basic notions advanced in the draft will likely remain intact,

Examiners will assess the borrowing needs of a bank's community and then see how many loans the bank actually made.

Mr. Cross said this "performance context" has proved effective as acommonsense guide in pilot exams.

"It's just a case of doing your homework and using common sense in doing it," Mr. Cross said. Though considering context could be burdensome, examiners have been taught "know when to say 'when,'" he said. "They need to know when they've gotten enough information to take on the exam."

The performance context, in the draft acquired by American Banker last week, calls for examiners to assess the borrowing needs of a bank's community by talking with local groups, regulatory agency managers, and a bank's competitors. This would then be compared with the bank's own assessment of the area's credit needs.

Industry officials said such a system would overburden examiners, which could lead to sloppy or inaccurate evaluations.

"The intent of all this was to reduce paperwork, but they have put a tremendous responsibility on the examiners," said Diane Casey, national director of financial institutions regulatory issues at Grant Thornton.

Jeanine Catalano, senior manager with KPMG Peat Marwick's regulatory advisory practice, said shifting the paperwork burden from banks to examiners may lead to disagreements.

"If the bank agrees with the government's idea of the community's credit needs, then everything's fine," said Ms. Catalano. "If they don't agree, then there is a problem. I don't have a lot of faith that examiners are going to always get the right read on the needs of a community."

Consultants like Ms. Catalano said bankers, anticipating run-ins with examiners, should continue to collect all this information as a defensive measure.

Reacting to this sort of criticism, Mr. Ludwig told the American Bankers' Association convention in San Francisco Monday that the draft exam procedures would be "trashed." He said the agency wanted to eliminate the paperwork burden on bankers.

But Mr. Cross said the performance context is not likely to change greatly, even with revisions in the procedures. There is no expectation that every examiner would perform every step with every exam, but the guidelines remain to help examiners learn about the bank's community.

He also said other bugs were being worked out. For example, regulators plan to reduce the number of loans sampled under CRA.

"We don't have an insurmountable task in front of us," Mr. Cross said.

In the current draft, examiners would first obtain economic and demographic information on a bank by using government data, published demographic statistics, or data obtained from community contacts. Information from the bank would then be compared with the government statistics and balanced with community comments from a bank's public file and elsewhere.

Next, through discussions with "management and other agency personnel familiar with the institution," a bank's major product lines, business strategies, and areas of expertise would be determined.

Then, annual reports, prior CRA reports, and other information would be examined. After that, a bank's capacity to serve its coummunity would be determined by studying the economic climate of the area along with the bank's size and branch network.

Finally, financial information from any "similarly situated" banks in the assessment area would be studied to enhance the examiners' idea of the assessment area. This step alone, Ms. Casey said, could take an extremely long time when dealing with banks in New York, Washington, and other large cities where there are many competitors.

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