WASHINGTON

A first step toward modernizing the Small Business Administration's 7(a) loan program was taken in the recently enacted thrift fund rescue law. Page 2

Capital ratios are not a good tool for identifying problem banks in time to save them, according to a recent study by the Boston Fed. Page 3

REGIONAL BANKING

Picking up some of the customer fallout from consolidation among superregionals, smaller northeast regional banks and thrifts continued to report generally strong earnings. Page 4

California thrifts continued to pleasantly surprise most analysts with third-quarter earnings. Page 5

COMMUNITY BANKING

Fear of personal liability if a bank or thrift fails has driven some directors to quit and some candidates to decline directorships, a survey by a directors trade group says. Page 6

Nearly a quarter of North Carolina's state-chartered thrifts are pondering conversions to state bank charters. Page 6

INVESTMENT PRODUCTS

Chase Manhattan is firing up a program to get other banks to sell its Vista funds. Page 7

MORTGAGES

Moving to defuse a potentially explosive issue before next week's convention of the Mortgage Bankers Association, Fannie Mae said it would sharply reduce requests that lenders buy back problem loans. Page 8

The Comptroller's Office will permit banks to enter the mortgage reinsurance business. The move could bolster their profits and encourage broader participation in residential lending. OCC Chief Counsel Julie L. Williams called the decision "a natural extension of the type of activity (banks) do already." Page 8

CREDIT/DEBIT/ATMs

A clash between big and small merchant processing companies flared in the recent election of directors for industry's trade association. Page 12

First Union hired a former executive of Electronic Payment Services to oversee its expanding smart card initiatives. Page 13

LETTERS Page 14

FINANCE

A Toronto trade group conference attracted bankers from around the world to express concern about the North American economy - and to note the importance of being strict about loan quality. Page 18

Derivatives dealers are considering changing their product lines to reduce the impact of a proposed mark-to-market rule for users of the products. Page 18

Bank stocks outperformed the overall stock market during the last several weeks, reflecting the industry's strength relative to other businesses, analysts say. Back page

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