Regulators step up action on U.S. banks: report

NEW YORK (Reuters) - Federal regulators have raised the number of struggling U.S. banks they have effectively put on probation, forcing them to fix their problems to avoid potential failures, the Wall Street Journal said on Monday.

The two main U.S. bank regulators -- the Federal Reserve and the Office of the Comptroller of the Currency -- have issued more memorandums of understanding this year than they did for all of 2007, the Journal said, citing data obtained from regulators under Freedom of Information Act requests.

Banks don't have to disclose the memorandums, which are an early-warning system about troubled banks but are not meant to imply a bank is at risk of failing, the Journal said. They are often a precursor to more severe, publicly disclosed enforcement actions if conditions do not improve.

The secret agreements can force banks to take steps including raising capital, cutting back on risky loans and suspending dividend payments, the Journal said.

The Federal Deposit Insurance Corp is scheduled to release its updated list of "problem" institutions on Tuesday, the Journal said. There were 90 banks on its list on March 31. Yet, since July 11 five banks have failed and many other banks are considered at risk by regulators, the Journal said.

U.S. banks are struggling with their worst crisis since World War Two amid deteriorating real-estate and credit markets. ....