Federal Deposit Insurance Corporation

sees growing risk in construction and consumer lending, the agency says in its semiannual report.

The FDIC, which insures deposits at the country's more than 9,000 banks and thrifts, says the percentage of banks that made speculative construction loans, those without significant sale or leasing commitments made ahead of time, rose to 29% from 26% in the previous six-month period. The report also noted increases in two other risky construction underwriting practices: Loans that permit borrowers to defer interest payments, and loans made without cash equity on the part of the borrower. Banks loosened standards mostly to boost growth or in the face of competition, the agency says.

The report on underwriting practices, which covers the six-month period ending March 31, also noted increased risk in consumer lending at some banks. The percentage of banks that made loans to borrowers "who lack demonstrable ability to repay" increased to 20% from 18% in the prior period. And 15% of banks said they frequently made secured consumer loans without adequate collateral protection, up from 14%.

General underwriting trends painted a slightly better picture, the FDIC said. Aside from the consumer and construction loans, risky underwriting practices declined in other major loan categories, including commercial, real estate, agriculture home equity and credit card lending, which is likely a response to the rapid credit deterioration in some of those categories in the past year. In general, the proportion of banks with high risk associated with the current underwriting practices slipped by a percentage point, to 4%.