The day after Signet Banking Corp. and Bank of Montreal said they had been caught up in a $324 million loan scam, top credit executives from both banks were speaking at a conference in New York.

Their topic: "The Credit Cycle: Is It Different This Time?"

Signet's T. Gaylon Layfield 3d, senior executive vice president of consumer banking, and Brian Ranson, a senior vice president at Bank of Montreal, told members of the Bank and Financial Analysts Association last week that banks had improved their risk management systems since credit problems last hit the industry, earlier in the decade.

But maybe things aren't so different this time after all.

As more details filter out about the alleged scam said to have ensnared Signet, Bank of Montreal, and five other lenders, it has become obvious that these institutions - particularly Signet, the lead lender - committed some classic errors of the type that have always gotten banks into trouble.

Chief among the errors were making exceptions to loan policy and failing to sufficiently investigate the borrower.

Signet, which has $11 billion of assets, has a legal lending limit of $128 million to one borrower - but a lower "house" limit of $50 million. Signet's share of the $324 million loan was $81 million.

Signet executives declined to comment Friday. But analysts who have talked with the company say the bank always intended to bring its $81 million exposure - actually the largest credit on its books - down to its house limit by "participating out" the $31 million excess. The scandal apparently broke before Signet could do so.

Richmond-based Signet had previously participated out about $173 million of the loan to such lenders as NationsBank Corp.; CoresStates Financial Corp.; Austria's Creditanstalt-Bankverein; Long Term Credit Bank of Japan; Bank of Montreal, and Hitachi American Credit.

Technically speaking, the loan - to a company that purported to be working on a top-secret project for Philip Morris Cos. - was a participation rather than a syndication, which means that all of the banks involved had responsibility for doing their own due diligence. Had it been a syndication, that responsibility would have chiefly resided with Signet.

Until more details emerge, it won't be clear exactly where the various banks erred in their analysis. But working from the information available so far from federal filings in the case, outside observers can point to a couple of things that should have raised red flags.

The alleged perpetrator, Edward J. Reiners, a former Philip Morris employee from Somers, N.Y., apparently provided the banks with forged documents that were not thoroughly scrutinized. It appears Mr. Reiners avoided such scrutiny by getting the banks to agree that all access to Philip Morris, ostensibly the borrower, be routed through him.

The Philip Morris name and credit rating also seem to have encouraged Signet and the other banks to relax their guard. "Philip Morris is the largest employer in Richmond, and Signet has had a relationship with that company for a long, long time," said Dean Witter analyst Anthony R. Davis.

"That doesn't justify what happened. But it provides some perspective on why this particular credit got booked in the first place."

Signet had actually tightened its credit controls considerably in the wake of the real estate debacle of the early 1990s. Since that time, for example, industry concentrations have been reduced and most commercial loans are restricted to $30 million or less in size, according to analysts.

The only exception permitted was long-term relationships, which could be serviced at the house limit. Analysts have been told Signet currently has only half a dozen credits at the $50 million level, but bank spokeswoman Terri Schrettenbrunner said she could not confirm that estimate.

Despite the scandal, analysts remain generally supportive of Signet, which has launched some innovative marketing programs involving information-based technology. Before the scandal broke, Wall Street's attention had actually been focused on Signet's consumer portfolio, particularly the "loan-by-check" product, which has experienced significant losses in recent test mailings.

The loan scandal "is not tremendously relevant from an investment perspective," said Moshe Orenbuch, with Sanford C. Bernstein. "People make mistakes, and this one was a beauty. But it was clearly a one-time transaction."

One factor helping Signet preserve some confidence on Wall Street is the hope of substantial recoveries. According to news accounts, federal investigators located about $215 million in bank accounts held by Mr. Reiners, which would constitute 85% of the $254 million balance remaining on the credit.

Both the U.S. attorney handling the case and Signet declined to comment.

Standard & Poor's said Thursday that in view of the alleged fraud it was considering a downgrade of bonds issued by Signet and its subsidiary bank. Signet's corporate credit is now rated BBB-minus.

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