Business Notes BANKS

Some leading U.S. banks last week were forced to recognize reality. Government officials instructed three dozen of them to write off nearly $4 billion of their bad loans to Latin America. The government wants the banks to admit that some of their loans may never be paid back.

An interagency group of regulators instructed the banks to write off an additional 20% of $2.9 billion in loans made to Argentina and 20% of $11 billion loaned to Brazil. The announcement was unexpected, since both countries have recently achieved some economic gains. Although Brazil has been delinquent on its long-term debt, President Fernando Collor de Mello has launched promising economic reforms since taking office in March. Argentina last month began paying some interest after a two-year halt.

The forced write-offs will affect such giants as Citicorp and Chase Manhattan, whose nonperforming loans to both countries amount to $4 billion and $2 billion.