WASHINGTON - A new subprime capital plan set to be unveiled today has been delayed by Office of Thrift Supervision Director Ellen Seidman, who wants to run it by her new superiors at the Treasury Department.

The four banking and thrift agencies are expected to issue something soon. Sources said regulators will take a softer tack by issuing examiner guidelines rather than rules to lenders. Lenders prefer this sort of guidance to across-the-board rules because examiners would be able to use discretion in applying the standards.

Regulators have been trying to devise a way to require subprime lenders to hold more capital since early last year, when they floated a plan that would have doubled capital requirements for institutions whose subprime loans exceeded 25% of Tier 1 capital. Lenders opposed that plan, claiming it defined subprime lending too broadly.

The new guidance is expected to alter the definition of subprime lending in a way that favors lenders, but details were sketchy Tuesday. It is expected to instruct examiners to require banks to hold "materially higher" capital for subprime loan programs than for prime loans. But the guidance would let examiners determine the exact amount of necessary capital in each case.

"It would be up to the examiner to see if the guidelines were sufficient for that institution," said one source who has seen the guidance.

Some industry representatives expressed concerns about yet unknown aspects of the guidance.

"It is very important how the agencies have defined subprime and that they only target institutions with segregated portfolios of loans," said Karen Thomas, director of regulatory affairs for the Independent Community Bankers of America. "The FDIC has said there are 150 institutions with significant exposures in the subprime lending business. Hopefully, these are the institutions that will be subject to the review."

"Our contention all along has been that examiners have the authority and the ability through the supervisory process to deal with it on case-by-case basis," added Charlotte Bahin, director of regulatory affairs for America's Community Bankers. "But we need to know how subjectivity comes into play - how would different examiners decide whether or not more capital would be needed?"

But industry representatives did stress that they favored the supervisory approach. "The issue with subprime isn't subprime lending per se, but what kind of subprime lending it is and how it is being managed, which is an examination analysis," said Paul Smith, senior counsel for the American Bankers Association. "It sounds like they've agreed that it requires more on-site analysis."

Industry representatives have been expecting the new subprime capital plan all month. But the changeover from the Clinton administration to the Bush administration has held it up.

An OTS spokesman said Tuesday that the agency is trying to send the examination guidance for approval to the Treasury Department, but has not located the appropriate official yet. Some sources suggested it was unusual for the OTS to make such a move, and speculated that Ms. Seidman may be stepping carefully around her new boss. "I would call it a superabundance of caution in sending it to Treasury," said a source familiar with the guidance, who spoke on the condition on anonymity.

The OTS spokesman denied that, calling the speculation "Washington talk." He argued that the agency normally gives Treasury notice on new rulings, and that there was nothing unusual about this guidance. "We alert Treasury as a matter of courtesy and we want to do that in this case," the OTS spokesman said.

Though Ms. Seidman has a year and a half left in her term, industry and government sources said that the Bush administration wants to replace her. Some suggested that Ms. Seidman is trying to curry favor with new Treasury officials in an effort to keep her job.

It's unclear whether President Bush has the power to replace Ms. Seidman, whose term ends in October 2002. He may replace the Comptroller of the Currency by simply giving notice to the Senate. But the 1989 law that established the OTS did not include such a provision.


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