Magazine article American Banker

Clarke: Loan Amortization Possible; Comptroller Says Regulators May Extend Option to More Ailing Banks

Magazine article American Banker

Clarke: Loan Amortization Possible; Comptroller Says Regulators May Extend Option to More Ailing Banks

Article excerpt

Comptroller of the Currency Robert L. Clarke last week said federal regulators are considering a plan that would permit troubled banks to write off sour loans over a period of years.

Congress already is discussing a similar plan for farm banks, but Mr. Clarke indicated in an interview that federal regulators may seek to extend that option to a broader array of troubled banks.

However, Mr. Clarke said that banks utilizing an amortization schedule should have to make "onerous" concessions, such as eliminating stockholder dividends or salary increases for officers.

In the interview, Mr. Clarke also expanded on a proposal, which he had revealed last month, to provide government aid to troubled banks. Mr. Clarke said that an open bank assistance program, if adopted by the regulators, probably would include the involvement of private investors as well as the Federal Deposit Insurance Corp.

Mr. Clarke stressed that the amortization and open bank assistance plans are only two of a number of proposals under consideration to aid troubled banks and bolster the safety and soundness of the banking system.

He explained that the amortization plan would enable banks to cover their losses through internally generated earnings, rather than being forced to look outside for capital. But Mr. Clarke said that a writeoff period of five, 10, or even 30 years -- as some legislators have proposed -- is too generous. He suggested two of three years as a more appropriate schedule. …

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