Industry officials support a Federal Reserve Board proposal to broaden the securities powers U.S. banks may exercise overseas, but they want the agency to do more to keep their institutions competitive abroad.

In comment letters on the Fed's proposed rewrite of Regulation K, bankers said they support replacing the $60 million cap on overseas underwriting deals and the $30 million limit on holding any single foreign company's stock with new limits tied to capital levels.

But they complained that to take advantage of the higher limits banks must conduct these activities in holding company subsidiaries rather than in Edge corporations, which are units of the bank.

Imposing this structure would increase costs and make it tough for U.S. banks to win overseas business, industry leaders warned.

"Conducting business in multiple entities involves intercompany transactions and duplicative infrastructures, all of which carry a cost and increase, rather than reduce, risk," wrote Stephen E. Kowitt, managing director at J.P. Morgan & Co. Instead, he said the Fed should allow all activities to be conducted in the bank.

"Encouraging U.S. banking organizations to extrude international banking activities from Edge corporations and into a bank holding company subsidiary will not serve to make U.S. banks more competitive," agreed Larry P. LaRocco, managing director of the ABA Securities Association.

Mr. LaRocco also said he was unsatisfied with a proposal to let foreign branches of U.S. banks underwrite investment-grade government debt. The Fed also should let these branches underwrite noninvestment-grade government debt issued by countries where they operate, he said.

Industry officials also urged the Fed to enhance provisions allowing banks to engage in reinsurance underwriting. E. Kenneth Reynolds, executive director of the Association of Banks in Insurance, said the Fed should let banks underwrite credit-related reinsurance in direct subsidiaries of the bank.

"This would be consistent with allowing U.S. banking organizations to compete with foreign banking organizations and insurance companies," he said.

Carmen F. Effron, president of BancBoston Insurance Agency, said the Fed should drop requirements that investments in reinsurance underwriting units be deducted from the bank's capital.

"If U.S. banking organizations ... must deduct any investment from parent company capital, they are likely to find it difficult to compete," Ms. Effron wrote.

The proposal also came under attack from insurance groups, which oppose the Fed's effort to let banks reinsure life insurance policies issued in the United States. Currently, U.S. banks only may reinsure policies issued outside the country.

Craig A. Berrington, general counsel at the American Insurance Association, said the Bank Holding Company Act specifically prevents banking companies from underwriting insurance in the United States.

"To rely on the fiction that reinsurance of U.S. insurance policies is a foreign activity merely because the transaction is booked in an offshore subsidiary is inconsistent with long-standing board rulings," he wrote.

Franklin W. Nutter, president of the Reinsurance Association of America, said adopting the reinsurance provisions would further reduce the incentive of banks to agree to a desperately needed financial reform bill.

"The future interests of U.S. financial institutions in maintaining and enhancing a competitive position in the international marketplace should compel us all to abandon misguided and shortsighted fiction in favor of real prospects for financial reform," he said.

The Fed has been attempting to rewrite Reg K for nearly three years. It is not expected to issue a final regulation until late this year.

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