June 6, 2008 / 5:35 AM / 12 years ago

National City under U.S. regulatory scrutiny: report

(Reuters) - National City Corp, a large U.S. Midwest regional bank, has entered into a memorandum of understanding with federal regulators, effectively putting the bank on probation, the Wall Street Journal said on Friday, without saying where it got the information.

Terms of the confidential agreement with the Office of the Comptroller of the Currency are not known, the newspaper said. The agreement was entered into over the past month or so, the newspaper said.

Neither Cleveland-based National City nor the OCC immediately returned calls seeking comment.

The agreement reflects the growing regulatory pressure that financial institutions face, as they struggle with the fallout from the credit market turmoil.

Memoranda of understanding allow banks to work with federal regulators to address financial problems, without necessarily triggering alarm among depositors. Regulators have been pushing lenders to raise more capital and cut lending risk.

Banking experts estimate that a handful of medium-sized banks have recently entered memoranda of understanding, the newspaper said.

Mounting losses from mortgages and other debt have forced banks such as National City, Citigroup Inc, Wachovia Corp and Washington Mutual Inc to raise capital and cut dividends.

In April, National City raised $7 billion from private equity firm Corsair Capital and other investors, as mortgage and home equity problems led to its third straight quarterly loss.

National City shares closed at $5.35 on Thursday on the New York Stock Exchange. Shares of the company are down about 68 percent year to date. They have fallen 85 percent from a year ago.

Reporting by Tenzin Pema in Bangalore; Editing by David Cowell

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