SAMPLE LETTER SENT TO SOME BANK HOLDING COMPANIES




                                        January x, 1999


Chief Financial Officer
Bank Name
Address

Dear Chief Financial Officer:

     In connection with our focus on transparent financial
reporting and potential earnings management issues, we may
select your 1998 annual report for review.  For your
consideration as you prepare that filing, this letter
identifies commonly requested disclosures that may be
applicable in whole or part to your explanation of the
provision for loan losses and the loan loss allowance.

Description of Business

Describe your systematic analysis and procedural discipline,
required by FRR-28, for determining the amount of your loan
loss allowance.  Explain:

*  how you determine each element of the allowance,

*  which loans are evaluated individually and which loans
  are evaluated as a group,

*  how you determine both the allocated and unallocated
   portions of the allowance for loan losses,

*  how you determine the loss factors you apply to your
   graded loans to develop a general allowance, and

*  what self-correcting mechanism you use to reduce
   differences between estimated and actual observed losses.

Management's Discussion and Analysis:

Explain fully the reasons for changes in each of the
elements and components of the loan loss allowance, even if
the total provision for loan losses did not change
materially from period to period, so that a reader can
understand how changes in risks in the portfolio during each
period relate to the loan loss allowance established at
period-end.  Quantify and explain:

*  how changes in loan concentrations, quality, and terms
   that occurred during the period are reflected in the
   allowance,

*  how changes in estimation methods and assumptions
   affected the allowance,

*  why reallocations of the allowance among different
   parts of the portfolio or different elements of the
   allowance occurred,

*  how actual changes and expected trends in nonperforming
   loans affected the allowance,

*  how actual changes and expected trends in risks
   associated with cross border outstandings affected the
   allowance, and

*  how the level of your allowance compares with
   historical net loss experience.

Financial Statements

     Include a complete description of  your accounting
policy for the allowance for credit losses which
specifically describes how you determine the amount of each
element of the allowance.



                                        Sincerely,



                                        Robert A. Bayless
                                        Chief Accountant