New Rules May Force Sale of Many U.S. Banks : Finance: Many institutions will have to find a buyer or raise money to comply with much tougher regulations.

A quarter of the nation’s 12,115 banks may have to raise money or seek a buyer by January because of stringent new banking restrictions designed to avoid failures, analysts say.

“You will see a spurt of acquisitions,” said Edward Yingling, executive vice president at the American Bankers Assn.

He said banks struggling to survive are those that have just $2 billion to $3 billion in assets.

Those that are unsuccessful will be closed or sold by the government.

The Federal Deposit Insurance Corp. expects to take over more than 60 to 80 banks with about $20 billion in assets in the first quarter of 1993.

Driving these changes are tough rules adopted by Congress last year after a rash of bank failures in the 1980s emptied the industry-financed insurance fund used to pay off depositors at failed banks.

Congress agreed to lend the fund $70 billion to get back on its feet. But, as a condition, it cracked down on banking practices ranging from real estate lending standards to executive pay.

“They will not be as vulnerable to little ups and downs in the market. They will be healthier, their costs lower and failures fewer,” one congressional staffer said.

The rules are starting to kick in as bank agencies write the regulations and the tough restrictions take effect at the new year.

Under the rules, banks will have to hold far more capital--a crucial cushion against losses and their last defense against failure--if they want to avoid limits on operations. The Federal Deposit Insurance Corp. and the Federal Reserve last week required banks to hold at least 10% capital against total assets, to be free of limits. Up to now, the highest capital standard was 8.0%.

Banks with capital below this level face progressively tougher restrictions, starting with caps on interest offered on deposits, stepping up to removal of top officers and finally shutdown if capital drops to 2% or less.

In another incentive for institutions to be capital rich, the FDIC last week decided to raise deposit insurance premiums only on banks with weak capital levels and poor management.

What this means, said Deputy Treasury Secretary John Robson, is that “capital is king.”

“Capital has became part of the reward system. If you’re well-capitalized you have freedom to expand,” he said. Those that cannot meet these standards have their wings clipped.

Bert Ely, a banking consultant based in Alexandria, Va., said the tough capital standards will fuel an already rapid decline in banking, harming economic growth.

“The industry is in an asset free fall and the shrinkage will continue at least for the next couple of years,” he said.

Banks and thrifts have shrunk by one-sixth in total asset size in the last three years.