ARLINGTON, Va. -- Citicorp chairman John Reed told a banking conference here that the industry "had better be proactive" in its approach to fair lending and the Community Reinvestment Act.

"I am trying to create a mechanism that gauges the essence of what the issues are before the community," Mr. Reed said.

At the same time, Mr. Reed said he did not want his bank to be a "high CRA performer and get a lot of stars on our chest."

Those banks that "stick their heads up too high," he said, would get accolades, but would also get shot at.

Disclosure Sufficient for Swaps

In a wide-ranging speech to a conference sponsored by the Bank Administration Institute, Mr. Reed also expressed concern that Congress would go too far in trying to deal with derivatives.

"I have no objection to requirements for more disclosure and information," he said. "But new regulation gets to be a little more difficult. If you go from disclosure to regulation, you lose some of the efficiency.

"That would not be a big problem for banks, but it would be a big problem for our customers," he added.

Mr. Reed said some criticism of derivatives is misdirected.

"You can obviously use them to gamble, but there's nothing you can do with derivatives that you can't do in the spot market," he said.

The Citicorp chairman also praised interstate branching legislation now pending in Congress.

"From an administrative point of view, getting rid of all the subsidiaries we are required to have these days can only be good," he said.

Mr. Reed said the industry continues to suffer from overcapacity and predicted extensive consolidation over the next 10 years.

He also warned that banks need to become more productive. "I think the banking industry is fat," he said. "My country is fat, and we have done a lot. We took $1.5 billion in expenses out."

Mr. Reed said the industry's revenue-expense ratio is "fundamentally flawed. If we are going to be cost effective for our customers, we are going to have to get that down."

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