NEW CAPITAL RULES WOULD FAVOR FIRST INTERSTATE
First Interstate Bancorp <I> would
benefit from new banking capital adequacy rules proposed by the
Federal Reserve Board, Chairman Joseph Pinola said.
    "We are one of the few banks that would have an improved
position," Pinola said in an interview, noting First Interstate
has fewer off balance sheet liabilities than many other banks.
    Under the proposed rules, a bank's minimum capital
requirement would be determined by the assessed risk of their
assets, including off balance sheet liabilities that are not
currently taken into account.
    Currently, banks must retain a primary capital ratio of 5.5
pct.
    First Interstate reported a primary capital ratio of 6.14
pct at the end of 1986.
    Pinola said First Interstate has since raised that ratio,
however, to about 6.70 pct, through a recent preferred stock
offering and a 200-mln-dlr subordinated capital note offering
announced yesterday.
    First Interstate reported a relatively average return on
assets ratio of 0.68 at the end of 1986.
    Pinola said First Interstate's return on assets ratio will
improve to the 0.70-0.71 range at the end of the first quarter,
because 1986 year-end assets, at 55.4 billion dlrs, were
overestimated by about two billion dlrs.
    He said he is anxious to improve the return on assets ratio
further, but continued loan losses at First Interstate's Rocky
Mountain state banks continue to hold down profits.
    Pinola said its banks in other states are showing excellent
return on asset ratios, with its Arizona and Washington banks
running at about 1.30, its Oregon bank showing 1.00 and its
California bank at about 0.83.
 Reuter
