By Cosby Woodruff, Montgomery Advertiser, Ala.

Feb. 9--U.S. Sen. Richard Shelby said a recent FDIC statement on small-business lending could open up more loans, and at least some Alabama bankers agree.

Shelby spoke Monday to the Montgomery Area Chamber of Commerce's Eggs & Issues breakfast. Afterward, he said the FDIC statement, issued jointly with other federal and state banking regulators, is a step in the right direction.

The two-page statement notes that some small businesses are having difficulty getting loans and that some banks are fearful of how regulators will view loans to small businesses. The memo directs regulators to be less critical of loans to small businesses.

"As a general principle, examiners will not adversely classify loans solely due to a decline in the collateral value below the loan balance, provided the borrower has the willingness and ability to repay the loan according to reasonable terms," the statement reads.

Shelby, an Alabama lawmaker who is the ranking Republican member of the Senate's Banking Committee, praised the effort to encourage small-business lending.

"I think that makes all the sense in the world," he said. "If someone is able to repay the loan, that should always be the No. 1 factor."

Carl Barker, Montgomery executive for ServisFirst Bank, agreed. ServisFirst is a niche bank focused largely on small-business lending, and Barker said the new rules would make it easier for banks and borrowers.

Barker said banks at times push borrowers to liquidate collateral, which puts the business in a bind.

"I think this will work better for banks and for borrowers," he said.

A representative of Regions Bank, a larger business lender in Alabama, agreed.

"We welcome government initiatives and regulatory actions that will spur growth and increase loan demand, which has slowed due to the challenging economic environment," spokeswoman Evelyn Mitchell said.

Shelby said banking regulators are predicting more bank failures this year, possibly topping 200 for the year. Regulators, he added, need to work on helping solvent banks as well as closing failing banks.

"For banks to loan money to small- and medium-sized business, they are going to have to be solvent," he said.

Shelby also predicted a slow recovery that might not become evident for another year or longer.

"This is going to be a tough year economically," he said.

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