The chairman of the Federal Deposit Insurance Corp. said yesterday that bank regulators must sharply step up their efforts to detect fraud, which he said is a major reason that banks fail.

L. William Seidman, in a speech to be given in Dallas, said a recent FDIC survey of 75 banks that failed between 1980 and 1983 showed that "criminal misconduct by insiders was a major contributing factor in 45 percent of the failures." A text of his remarks was released here.

Seidman said regulators "must take the view that finding fraud is a primary objective of bank examinations -- not an incidental activity." He said the FDIC, the primary federal supervisor of about 8,500 state-chartered banks, is preparing a set of "red flags" bank examiners can use to look for evidence of misbehavior.

He also said the agency is working with a committee of the American Institute of Certified Public Accountants to develop a statement outlining the responsibilities of outside auditors in detecting fraud.

When a string of banks controlled by former Tennessee politician Jake Butcher failed in 1983, the FDIC had to pay out several hundred million dollars. Butcher and several of his associates were convicted of federal crimes, but it took regulators a long time to nail down the insider loans and other abuses that caused the Butcher bank empire to collapse.

The FDIC becomes receiver in nearly all bank failures. It often is stuck with the bad assets of the failed bank, and sometimes, when no buyer can be found, it must pay off depositors up to $100,000 each.

All bank regulators -- the FDIC, the Federal Reserve Board and the Office of the Comptroller of the Currency, as well as the Federal Home Loan Bank Board, which regulates the savings and loan industry -- have been working with the Department of Justice on ways to improve the detection and prosecution of banking fraud.

In an address to the Southwestern Graduate School of Banking at Southern Methodist University, Seidman also called for tougher criminal laws against bank fraud and said money laundering should be made a crime so prosecutors do not have to build their case against banks on the failure to file currency reports.

He also called for an amendment to the financial privacy act to exempt the privacy protection for bank officials who also are bank customers, and he said any prohibitions Congress places on use of lie detectors should exempt banks working to detect fraud.