US regulators have increased the number of struggling banks they have put on probation, forcing them to sort out their problems and avoid potentially costly failures, according to the Wall Street Journal.

The Federal Reserve and the Office of the Comptroller of the Currency, two of the nation's primary bank regulators, have issued more memorandums of understanding so far this year than they did for all of 2007, according to data obtained from regulatory agencies under Freedom of Information Act requests.

These agreements can force banks to take steps including raising capital, cutting back on risky loans and suspending dividend payments.

The depth of problems in the banking sector will become clearer today, the WSJ said, when the Federal Deposit Insurance Corporation updates its list of "problem" institutions. The FDIC had 90 banks on its list on 31 March. There have been five bank failures since 11 July, and many other banks are considered at risk by regulators.

Government officials have been brokering the memorandums with institutions large and small, from National City, a Cleveland bank with $154 billion in assets, to $660 million-asset First Private Bank & Trust, a unit of Boston Private Financial.

Banks are struggling with their worst crisis in a generation amid the deterioration of real-estate and credit markets nationwide.

"The increase in [memorandums] is not surprising given the more challenging market conditions faced by many banking organizations," said Roger Cole, the Fed's director of banking supervision and regulation. They "are useful in specifying weaknesses in risk management and other areas that need to be addressed by bank management."

Because banks don't have to disclose the memorandums, bank customers and investors generally remain in the dark. In some recent cases, federal regulators haven't disclosed more-serious enforcement actions against banks until after those banks have failed. Regulators are often wary of igniting a run on the bank, with panicked customers yanking deposits.