WASHINGTON — Concerned that state-chartered banks may have a competitive advantage over national banks, the Office of the Comptroller of the Currency is adopting a rule to test an easing of lending limits.

Current regulations cap national banks’ lending to one borrower at 15% of capital. Beginning Aug. 11, qualifying banks in 36 states with higher lending caps will be able to lend up to 25% of capital to a single borrower for one- to four-family residential real estate and small businesses.

“We have heard from banks that higher lending limits afforded [to] state-chartered institutions in some states is a significant competitive issue,” Comptroller John D. Hawke Jr. said. “One reason we created this [rule] was to find out how much interest there really is in higher loan limits.”

Thrifts will also be able to get into the game, the Office of Thrift Supervision announced.

The OTS generally emulates the OCC’s lending caps. All qualified thrifts may apply to the OTS to participate, an agency spokesman said.

A final rule, to be published today, does not change the program significantly from the proposal the agency floated in September — despite industry criticism that it does not go far enough. But that has not dampened enthusiasm for the program.

“We are happy with it,” said Charlotte Bahin, regulatory affairs director at America’s Community Bankers. “A lot of community bankers were bumping up against the loan-to-one-borrower limits.”

Some bankers argued that the OCC should just raise the caps immediately, without a test. The American Bankers Association also encouraged the OCC to allow agricultural loans under the program.

“Many of our small banks are in rural areas and dependent on agricultural-related business,” ABA senior counselor Paul Smith said.

Mr. Hawke acknowledged that “some bankers wanted us to go further and some thought we put too many restrictions on the program.” But ultimately OCC officials decided they want to evaluate a more limited program before deciding to expand or alter it.

“If they really have a need, this will demonstrate that they have a need and can meet it in a safe and sound way,” Mr. Hawke said.

To apply for a higher loan limit, a bank must be headquartered in a state that has higher limits for state-chartered banks, be well-capitalized, and have an overall Camels rating of 1 or 2 in addition to scoring at least a 2 on the management component.

Even under the program a single loan still may not exceed $10 million, and small-business loans will be limited to $1 million.

Another safeguard prohibits a bank from using the program to make loans that would push its loan total above 100% of capital.

The program, which is to test the eased caps for three years, will mainly benefit community banks because its structure effectively prohibits a bank with more than $1 billion of assets from participating, Mr. Hawke said.

One state that has been particularly aggressive in raising lending limits is Oklahoma. To make its charter more attractive, the state last year raised its limits from 20% of capital to 30%. This, said state banking commissioner Mick Thompson, is one reason that 10 national banks in the state have converted to state charters in the last 18 months.

“We’ve got one bank right now that is in the process of converting because it’s had to participate out some of its bigger loans and is losing that income,” Mr. Thompson said.

Though national banks did not get everything they wanted up-front, some banking industry officials are confident they will in the end. “We are glad to see them do the [easing], and we think after they review [it] they should and probably will raise the limits,” said the ABA’s Mr. Smith.


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