Bush's proposal for banks in trouble, regulator claims Seidman says some banks oppose easing of standard.

April 25, 1991|By New York Times

WASHINGTON -- A senior bank regulator has said that the Bush administration's proposal to encourage more lending through the relaxation of a significant accounting standard might not be adopted by the government because it has run into strong opposition from several large banks.

L. William Seidman, the chairman of the Federal Deposit Insurance Corp., said yesterday that the proposal, which would enable banks to report greater earnings by splitting bad loans into performing and non-performing parts, had been criticized by several large banks that said it would have no effect on their financial statements. He did not identify the banks.

Bank analysts have said that some banks with large portfolios of non-performing loans would clearly benefit from the accounting change, and Seidman's remarks strongly suggested that the issue had turned into a fight between banks.

"From what I see now, there is a likelihood that it will not actually be accepted," Seidman said at a forum on banking issues at the National Press Club yesterday morning and in an impromptu discussion afterward with reporters.

"There are strong arguments on both sides. I just don't know how it will come out." He said he had not reached any conclusions on whether a change would be beneficial.

The Securities and Exchange Commission and the agencies overseeing the nation's banks and savings associations have been considering adopting the regulations, which were proposed in February and are awaiting final action.

The SEC and an interagency group with representatives from the comptroller of the currency, the FDIC, the Federal Reserve and the Office of Thrift Supervision are now receiving comments on the proposal, and they are expected to issue a ruling in the next few weeks.

Administration officials have urged the regulators to adopt the change to ease the availability of credit.

Announcing the proposal earlier this year, Deputy Treasury Secretary John E. Robson blamed overzealous government examiners for "terrorizing" bankers, who he said had responded by restricting loans to creditworthy customers.

In a speech today in Dallas, Treasury Secretary Nicholas F. Brady is expected to urge government examiners at their annual conference to avoid being overly aggressive on bankers.

But some lawmakers and administration critics have said that the accounting measure and instructions to the examiners would eventually come back to haunt both the industry and the government because they dilute standards at a time when more large banks are failing or encountering declining earnings.

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