WASHINGTON -- Courting community banks, Comptroller of the Currency Eugene A. Ludwig on Thursday said simpler exams are coming this October to national banks with less than $1 billion in assets.

Community banks hoping to qualify for the new exams will have to pass four tests, Mr. Ludwig said.

The bank must be rated one or two under the five-point CAMEL system. It must be a consistent and strong financial performer. The bank's management must be stable and hold a record of effectively responding to risks facing the bank. Finally, the bank must offer primarily traditional products.

Mr. Ludwig first announced plans to simplify community banks exams in February at the Independent Bankers Association of America's annual convention in Orlando.

He said then that streamlined evaluations would apply to banks with less than $250 million in assets. Mr. Ludwig quadrupled the size of banks that are eligible and laid out other details in a speech Thursday to members of independent bankers associations gathered here from 12 states.

"We must recognize that community banks are different from the rest of the banking industry," Mr. Ludwig said.

"If our loan review shows that loan qualify is good, we will not require documentation of the policies and procedures that led to those results," Mr. Ludwig said. "If we see that management has achieved consistent performance, we will recognize that management is effective."

The Comptroller's office has been testing these streamlined exams for four months. By the end of June, the agency will have detailed instructions on the new system for its examiners, who will be trained from July through September.

The agency estimates more than half of the 3,262 national banks will be eligible for these new exams. It's too soon to know whether the new exams will be cheaper, but the agency contends its goal is simply to use its resources more efficiently.

OCC spokeswoman Lee Cross denied Thursday that the new exams are aimed at appeasing smaller, national banks that say OCC supervision is too expensive.

Kenneth A. Guenther, IBAA executive vice president, applauded the new exams.

"You've got to give Gene Ludwig a gold star on this one," Mr. Guenther said. "He started this before he even knew there was an OCC membership problem."

In the last three years, 186 national banks have converted to state charters; 65 in 1993 alone. National banks pay an assessment to the OCC as well as deposit insurance premiums. State-chartered banks pay premiums, too, but do not pay any fees to the Federal Deposit Insurance Corp. of the Federal Reserve Board for exams.

"National banks are subsidizing the supervision of state banks," Ms. Cross said.

The Comptroller's office had to hire more examiners after Congress mandated annual evaluations of all banks in 1991. The extra personnel costs have been passed on to national banks in the form of higher assessments.

That is causing national banks to consider switching to state charters, a trend the agency would like to stop before it gets too strong.

Mr. Ludwig spent 30 minutes on the phone recently trying to talk a $14 million national bank out of switching to a state charter. The bank is changing its charter, estimating that it will save $9,800 a year in reduced exam costs.

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