The American Bankers Association (ABA), the largest industry group, said its members were growing increasingly concerned about the Treasury's Capital Purchase Programme, which aims to pump US$250 billion (S$368 billion) in capital into banks to spark more lending and ease a credit crunch.

'Bankers across the country are extremely upset about the manner in which the CPP programme is rolling out,' said Mr Ed Yingling, chief executive of the Washington banking association in a letter to Treasury Secretary Henry Paulson.

'These are strongly capitalised, profitable banks that never made one subprime loan. These bankers believe that they are being asked - in some cases pressured - to participate in a programme they did not seek and do not need.'

Mr Yingling added that the bankers 'see the value in the programme to the economy and their communities, but they should not be required to make this critical decision that could affect the very future of their banks in such a tight time frame and with so many uncertainties'.

ABA requested 'that the Treasury and bank regulators clarify the purpose of the programme very directly,' and that the Nov 14 deadline for applications be extended.

'As you know, bankers across the country are under a very tight time frame, with roughly two weeks left to make the very important decision of whether to participate in the CPP. At this point, there is great anxiety about whether or not to sign up,' Mr Yingling said.

He said bankers are uncertain about how participation or refusal in the programme will affect the institutions.

'Most importantly they have no way to know what other requirements may be placed on their institutions after the fact,' he said. 'Proposals have included tight restrictions on pay and bonuses, prohibiting dividends, and explicit lending requirements. It is completely unfair to ask thousands of banks across the country... when the impact of the programme on those banks is unknown.'

The statement came a day after the US Treasury said it had finalised the infusion of US$125 billion into nine major commercial banks as part of a financial system rescue plan.

Officials have pledged to commit US$250 billion dollars to bank recapitalisation under the US$700 billion rescue plan approved by Congress.

Of the sum, US$125 billion is going to the nine major national banks and US$125 billion to regional institutions.

Some reports have said banks were 'forced' to accept an investment amounting to partial nationalisation as part of the big economic rescue plan.

At the same time, lawmakers and White House officials have been pressing banks to use the capital to increase lending instead of hoarding cash and making acquisitions. Critics of the industry also worry whether the public capital may be used for generous bonuses for top executives.

Mr Yingling said: 'This is not a programme the banking industry sought. While the ability to purchase equity in institutions was authorised in the Emergency Economic Stabilisation Act, it was not in any way the primary focus of the bill, which was asset purchases. Apparently everything completely changed when the Europeans quickly adopted an equity purchase programme.'

The ABA chief said banks may refuse to participate 'if they are going to run the risk of being labelled - falsely - as needing government support, or of appearing to be asking for a handout, or of being subjected to additional unknown government requirements or restrictions'.

He added that proposals to stop dividends, restrict compensation, and require certain types of lending 'can have a devastating impact' on banks, which have a long history of paying dividends on shares to attract investors.

'Bank stocks, more than almost any type of stock other than utilities, are bought based on solid and relatively high dividends,' he noted. -- AFP