UPDATE 2-Two bankers' banks agree to Fed's risk limit order

* Fed orders two bankers' banks to improve operations

* Orders follow failure of major Atlanta bankers' bank

* Fed instructs banks to limit credit risk, improve capital (Adds Cole comments, byline)

WASHINGTON, Sept 3 - The Federal Reserve on Thursday ordered Midwest Independent Bancshares Inc, a "bankers' bank" in Missouri that provides services to about 450 financial firms, to strengthen its board oversight and better manage its credit risk, including its exposure to commercial real estate.

The Fed issued a similar order on Thursday to Nebraska Bankers' Bank, an offshoot of Midwest Independent Bancshares.

Bankers' banks provide correspondent banking services, such as credit card operations and clearing accounts, to community banks, and generally do not provide direct services to individuals. The Fed orders on Thursday follow the government's seizure in May of Silverton Bank of Atlanta, a bankers' bank that served about 1,400 client banks in 44 states.

The Fed ordered Midwest Independent Bancshares to craft plans to strengthen its supervision of managers, add outside directors, reduce its concentration of credit and better control problem assets.

It also cannot increase its loan portfolio without the Fed's approval and must submit a plan to maintain sufficient capital.

The Fed typically issues such orders when it finds evidence of unsafe and unsound practices at the banks it supervises.

The order regarding Nebraska Bankers' Bank, which provides services to about 140 banks in Nebraska, also instructed the institution to reduce its credit concentrations, improve its risk management, and not expand its loan portfolio without Fed approval.

The banking industry in general is still suffering from deteriorating loans and faces an increasing problem with commercial real estate loans that have been hit hard by the recession.

Chris Cole, senior regulatory counsel for the Independent Community Bankers of America, said some bankers' banks are experiencing the same woes as the rest of the industry. But he said Silverton's failures and the troubles with Midwest Independent and Nebraska Bankers' Bank are not necessarily a trend.

"Most of them are in good shape and doing well," Cole said.