Federal regulators announced yesterday that healthy savings and loan institutions will be permitted to convert directly to national banks, a status that may distance them somewhat from the stigma of the S&L industry's collapse.

The Office of Thrift Supervision (OTS) issued a legal opinion, reversing past government policy, saying that it would cut cost and red tape for federally insured thrifts that seek to become national banks. Up to now, they have been converting to bank status through convoluted and indirect methods.

Financial analysts in Washington saw the move as a signal that the Bush administration intends to press for the merger of the banking and thrift industries. Some said they would expect hundreds of healthy thrifts to become banks, leaving behind mostly troubled or dying institutions that are expected to be taken over by the government.

But OTS officials and S&L executives attending an industry convention in San Francisco saw less significance in the action. They said tax consequences would prohibit many thrifts from converting to banks.

Several industry lawyers said that only relatively new and small thrifts could convert with ease. Other thrifts tend to have large loan reserves set aside, and if they became banks they would have to start paying taxes on those reserves.

OTS Director Timothy Ryan told the 98th annual convention of the U.S. League of Savings Institutions in San Francisco that there is still money to be made in home mortgages, but that thrifts should be free to move into commercial banking.

Among those who saw the action as significant was Robert Litan, an economist with the Brookings Institution. "By regulation, they're allowing the thrift industry to be melded into the banking industry," he said.

"It starts to implement what many people believed was the administration's covert intention in FIRREA {the Financial Institutions Reform, Recovery and Enforcement Act of 1989}, that is, to eliminate the thrifts as a separate line of business in the financial industry," said analyst Karen Shaw.

There are many reasons a thrift might want to convert to a bank, aside from signs that the industry is facing a troubled future. The taint of the S&L scandal has driven business away even from well-run thrift institutions. In addition, banks have much broader lending powers.

Some may want to remain thrifts, said the Brookings Institution's Litan, because they can get loans from the Federal Home Loan Bank system, although banks with more than 10 percent of their assets in mortgages can as well.

"This is a very clear signal from Treasury of what they intend to do," said Diane Casey, executive director of the Independent Bankers Association, referring to a Treasury study expected to be completed this year on the future of the finance industry.

Currently, federally insured thrifts must convert to state-chartered thrifts, then to banks. Some thrifts are being dissolved and their holdings transferred to newly chartered banks. The OTS decision makes the process of change much simpler. While Ryan announced that it would be easier for thrifts to become commercial banks, he said he is "deeply troubled" about efforts by some S&Ls to become state-chartered savings banks, institutions that are comparable to thrifts but are not burdened by as many restrictions.

Ryan said if the Federal Deposit Insurance Corp. wrote rules prohibiting savings bank from investing directly in real estate or in junk bonds, then he would not object to thrifts converting to state-chartered savings banks. Staff writer Jerry Knight contributed to this report from San Francisco.