The Federal Home Loan Bank Board proposed yesterday that mutual thrift institutions be allowed to issue stock certificates as a way of increasing their capital.

The move is aimed at making mutual savings banks and savings and loan associations more competitive with other financial corporations while generating additional funds for mortgage lending.

For nearly a decade federal regulators have been trying to solve the capitalization problems of mutual institutions. Unlike stock corporations, which can get external funds by issuing stock, mutuals can build up capital only by setting aside earnings. Since 1971 the ratio of net worth to total assets for all savings and loan associations has fallen from 6.54 to 5.58 percent, according to bank board statistics. Four out of five S&L still are mutuals, but the number of mutuals converting to stock corporations has increased significantly.

Last spring, as a part of its overhaul of the nation's banking laws, Congress decreed that mutuals should be able to offer equity securities. Its intention was not only to preserve mutuals -- which have a grassroots appeal because they are "owned" by their depositors -- but to allow them to compete effectively with savings institutions owned by stockholders. Yesterday's proposed regulation implements that legislation.

The securities, called mutual capital certificates, or MCCs, are similar to corporate preferred stock except that they are subordinate to all claims. The certificates pay dividends and can be traded in the market, but cannot be redeemed by the issuing association for an average of 10 years. They are not insured, and investors have no assurance of getting their money back. They are in no way analogous to money market certificates, or MMCs.

Federally chartered mutual thrifts may issue stock for up to 20 percent of their (5 percent) reserve requirements. In other words, they may issue stock equivalent to one percent of their insured deposits. Bank board permission is required for larger offerings. State-chartered thrifts are not subject to this limitation.

The board also voted to allow S&Ls to invest up to 3 percent of their assets in service corporations, provided one-third of that amount is used primarily to serve inner-city community development. (Service corporations engage in those activities in which S&Ls cannot engage directly such as real estate development, insurance brokerage, property management and data processing.)

Furthermore, effective immediately, federal mutual savings banks may invest up to 5 percent of their assets in corporate, commercial or business loans. This is intended to preserve the character of savings banks at a time when financial institutions are becoming increasingly homogenized.

Finally, the board said that any stock association wishing to acquire another must notify federal regulators in a public announcement. This is to give the target association involved in an unfriendly takeover a chance to plead its case and warn its stockholders.