While I write to you in my individual capacity, I am the former president and chief executive officer of the Savannah (Ga.) Bank & Trust Co., and I served the American Bankers Association as its 1988-89 president.

The Post's editorial {"Failing Banks," Dec. 18} was right on the money. Straitjacketed by ancient laws, commercial banks have been unable to bring the latest technological and securities markets innovations to their traditional customer base. Fundamental and irreversible structural changes have left banks with few options to adapt other than investing in riskier assets and concentrating those risks unnecessarily. A flawed deposit insurance system has helped fuel this dilemma by providing an overabundance of "insured" deposits. As a result, our banking and financial system has evolved three features that must be reversed before stability can be restored.

First, our too far-reaching and destabilizing deposit insurance system must be reformed, using market discipline concepts where possible. Simultaneously, depository institutions must be allowed to adapt to competitive marketplace realities by removal of charter and geographical limitations that encourage excessive and concentrated risk-taking. Finally, the private sector must be encouraged to eliminate financial services overcapacity by channeling capital to the best operators and through extensive consolidation. This latter step can be taken in ways that allow ample room for well-focused niche players -- i.e., community banks -- as well as larger institutions that excel at managing the economies of scope and scale.

Failure to address these issues promptly and comprehensively will result in unavoidable and unworkable public-sector intervention that will make the current savings and loan difficulties look like the proverbial Sunday picnic.