OTS Rule Would Give A Free Hand to Thrifts In Electronic Banking

Thrift customers for the first time could open checking and savings accounts at automated teller machines under a proposal issued Wednesday.

That is just one wrinkle in the Office of Thrift Supervision's overall plan to streamline its electronic banking regulations. Basically, it would let thrifts conduct any activity electronically that they may offer through traditional means, OTS Director Nicolas P. Retsinas said.

The agency said thrifts need a free hand to develop competitive electronic commerce products.

"Outmoded and unnecessary regulations are at best potholes on that superhighway and occasionally can be land mines," Mr. Retsinas said.

"That doesn't mean there still won't be state police. That doesn't mean there still won't be road signs. ... We still have a responsibility."

For instance, the proposal said thrifts would have to adopt acceptable security measures for electronic products, but does not spell them out.

The proposal is scheduled to be published Oct. 3 in the Federal Register. Comments will be due Dec. 2.

OTS also pledged to issue updated examination procedures next week for electronic banking that concentrate on risk management and internal controls.

The industry's initial reaction was positive. "It is very consistent with what we recommended," said Gary Gilbert, a regulatory specialist for America's Community Bankers.

Besides letting thrifts use ATMs to sell deposit accounts, the rule would formalize the agency's Sept. 19 legal opinion giving thrifts permission to make loans through enhanced ATMs.

The Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency this year made it easier for banks to establish automated loan machines. However, regulators have not considered whether bank customers can open deposit accounts via ATMs.

Some questioned whether opening accounts at ATMs is feasible. "I don't see an application at an ATM," said Robert Engelman, president of Avondale Federal Savings Bank, Chicago.

Other experts said the proposal might spark the industry to invent a solution. For instance, customers could submit signature cards into the ATM's deposit slot.

The OTS plan also would lift limits that prevent thrifts from outsourcing more than half their data processing services. And thrifts would be allowed to team up with banks or nonfinancial companies to offer new electronic services, provided unregulated partners agreed to be examined by OTS.

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