WASHINGTON - The Independent Bankers Association of America has "opened the door wide" for the insurance industry's drive to limit bank powers, a rival trade group official charged.

Last week, the Independent Bankers said banks should be permitted to market insurance statewide from small towns, but not nationwide as the Office of the Comptroller of the Currency has allowed.

The trade group said national insurance sales are "closely tied to national interstate branching," which it opposes.

"That's just terrible," responded Edward L. Yingling, executive director of government relations for the American Bankers Association.

Strategy Assailed

"In the insurance area, you don't give away anything," he added.

"The IBAA has said insurance powers should stop at the state border, but the [insurance] agents won't stop there."

By law, national banks are permitted to sell insurance in towns of under 5,000 persons. The Comptroller's office has interpreted that to mean that an institution can market insurance nationwide from small towns - and that policy has been upheld in the courts.

The Independent Insurance Agents of America and other insurance groups have sought legislation that would restrict sales to the towns themselves and their environs. Until now, the IBAA has supported the agents.

The IBAA said its new position moves it closer to that of the rest of the banking industry. But Mr. Yingling disagreed.

"It gives members of Congress an excuse to act" on legislation favored by the insurance agents, Mr. Yingling said. "They can say the banking industry is split on the issue."

Mr. Yingling argued that the IBAA policy is potentially worse for community banks than the position advanced by the agents, since some small institutions sell insurance in local markets that cross state borders.

Small-Town Doctrine

But Stephen J. Verdier, a lobbyist for the IBAA, said his group's policy merely builds upon the small-town doctrine.

"We say banks should continue to serve their community, but say the authority should be extended to insurance sales within the entire state," he said.

Mr. Verdier added that the insurance industry's concerns would likely be taken up by Congress because of recent court decisions upholding the Comptroller's decision.

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