WASHINGTON -- The government can reduce the regulatory burden and ensure the industry's profitability if it eliminates three of the five banking agencies, a leading financial-services analyst said Tuesday.

Eugene J. Sherman, senior vice president and director of research for M.A. Schapiro & Co., told members of the National Economists Club that the country does not need the Office of the Comptroller of the Currency, the Office of Thrift Supervision, or the National Credit Union Administration.

Instead, Congress should divvy all authority. between the Federal Reserve and the Federal Deposit Insurance Corp., said Mr. Sherman, whose firm controls more than $250 million in bank stocks.

Specifically, the FDIC would assume safety-and-soundness and compliance responsibility for all types of depository institutions.

The Fed would issue charters, approve mergers and acquisitions, review expansion plans, and operate the payment and clearing systems, he said.

The change, which would not effect monetary-policy duties, would cut costs by reducing duplication among agencies, he said.

"We recognize the political impracticalities of what I have to say," Mr. Sherman said.

But, the change should reduce the cost of complying with banking rules, which he estimated at more than 36% of net pretax income. That equals approximately $16.6 billion a year, he said.

"That's a big financial burden on the industry," he said.

The government should keep the Fed and the FDIC because both institutions are politically independent from the executive branch, he said.

For example, the president cannot remove a central bank governor or an FDIC board member without good cause. But, the president can remove the Comptroller of the Currency for any reason.

Mr. Sherman also proposed reducing the amount of insured deposits to $25,000.

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