CHICAGO -- The storm of protest over the only numerical standard in the Community Reinvestment Act reform proposal has convinced Comptroller of the Currency Eugene A. Ludwig to rethink it.

Regulators have proposed that small banks wanting streamlined CRA exams be required to have "reasonable" loan-to-deposit ratios, which the reform proposal suggests should be about 60%.

"That has been widely misunderstood," Mr. Ludwig said. "It clearly - at the very least - has to be changed in terms of its explanation."

A Thousand Protests

Mr. Ludwig did not say, though, whether the number would be eliminated from the reform plan entirely. He made his comments at a conference sponsored by the Federal Reserve Bank of Chicago.

More than a thousand small bankers have written the agencies, praising them for their proposal to relieve banks with less than $250 million in assets from much of the CRA rule.

But banks have complained vigorously about the 60% figure, saying it is too rigid and fails to account for variations in communities and loan products.

"This has been the most misunderstood aspect, I think, of the proposal," Mr. Ludwig said. "And we clearly mistated this, or stated it in a way that people just don't understand.

Says It's Not Set in Stone

The comptroller insisted that the 60% figure is not set in stone.

"The test is that you have to have a reasonable amount of loans, given all the considerations of the community," Mr. Ludwig said. "But in order to simplify everybody's life, we put in a presumption, and the presumption was that if you were over 60%, you were presumptively OK."

Mr. Ludwig said he prefers to call the 60% figure "a screen, not a test." But bankers say that whatever top regulators call it, examiners are likely to treat it as a rigid floor, and small banks that don't meet it will be forced to forgo the streamlined CRA exam.

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