Bank trade groups are keeping a close eye on a new government program they say could steal deposits from community banks.

In August the Treasury reduced the minimum investment for buying short- term bills and notes to $1,000, from $10,000.

With Treasury bills now within reach of more consumers, bank industry officials fear customers will shift deposits away from community banks, which are already losing funds to the likes of Merrill Lynch and Charles Schwab.

"Lowering the size of the minimum purchase increases the potential pool of purchasers," said Keith Leggett, an economist with the American Bankers Association. "For community banks, which are struggling to attract funds, this is a new competitor."

The Treasury reduced the minimums as part of its ongoing effort to motivate Americans to save. Though 30-year bills could be bought with as little as $1,000 in the past, short-term bills required a minimum $10,000 investment, and Treasury notes with maturities of four years required at least $5,000.

Beginning next week, investors can also download applications for such securities from the Internet, thus speeding up Treasury purchases.

Consumers are already taking advantage of the program. Through the end of August the Treasury sold more than 1,300 short-term bills under $10,000, said John Longbrake, a Treasury Department spokesman.

One banker said the Treasury minimums will not threaten his deposits-as long as he offers competitive rates. This week the Treasury was paying an average interest rate of 4.76% on a one-year bill, while the average rate on a one-year certificate of deposit is 4.97%.

"As a practical matter, the rates that banks pay have been higher than Treasury securities for some time," said Ken A. Heiser, president and chief executive officer at $150 million-asset First National Bank of Hudson (Wis.).

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