The financial reform bill being molded by the House Banking Committee is not getting much support from the banking industry.

Edward L. Yingling, lead lobbyist for the American Bankers Association, said he has "deep concerns" about the way the legislation has come together over the first three days of debate in House Banking.

The ABA opposes new requirements to offer low-cost checking accounts and securities registration requirements for bank broker-dealers.

On insurance sales, an issue the committee had not finished debating by late afternoon, Mr. Yingling said: "There's nothing on the horizon that's going to satisfy the bankers."

In an attempt to win banker support, the committee on Thursday did give the Federal Reserve Board power to decide how bank insurance sales should be regulated.

Under the amendment sponsored by Rep. Michael Castle, R-Del., disputes that could not be resolved by the Fed would be kicked up to a newly created National Council on Financial Services.

Bank lobbyists, led by the Bankers Roundtable, are worried that state insurance regulators will be able to force the Fed or the national council to review many existing bank products to determine whether any are insurance.

Bankers fear that letters of credit and other products that resemble insurance could one day be classified as insurance.

"Our entire product line has been put in jeopardy," said Annie Hall, lobbyist for Columbus, Ohio-based Banc One Corp.

Over industry objections, the committee also approved new consumer protection rules for banks selling nondeposit products.

The measure, sponsored by Rep. John LaFalce, D-N.Y., was considered a requirement for Democratic support for the broader bill, which would allow banks, insurance companies, and securities firms to affiliate.

"Consumers will no longer be using banks just to make deposits," he said. "It will be increasingly important that consumers understand the exact nature and risks of the products they are purchasing."

Under the plan, banks would be required to:

Provide disclosure when products are not federally insured.

Tell customers that credit applications will not be influenced by the purchase of nondeposit products.

Reveal financial risks posed by a product.

Determine whether a customer meets a "suitability standard" based on a product's risks.

Keep banking and nonbanking activities physically separate.

Also, regulators would be required to establish a consumer grievance process to handle possible violations of these rules.

House Banking Committee Chairman Jim Leach said the requirements are "absolutely common sense."

The committee on Thursday also approved, by an 18-14 vote, an amendment by Rep. Ken Bentsen, D-Tex., that would require all bank brokers to register with the National Association of Securities Dealers.

"This is important for consumers so they can be sure they are purchasing a security from someone who has had appropriate training," he said.

Mr. Bensten said 85% of bank-employed brokers already register with the NASD.

Other amendments approved late Wednesday would:

Empower the National Financial Services Council to determine which products and services are "nonfinancial."

Permit the council to impose additional restrictions between banks and their affiliates and subsidiaries to protect consumers.

Prevent federally insured institutions from being held liable for liabilities of their affiliates.

Make it a criminal offense for any holding company employee to falsely represent that a bank is liable for the obligations an affiliate or subsidiary.

Prohibit bank affiliation with an insurance company found to have violated the Fair Housing Act, unless regulators determine the firm is back in compliance with the law.

On Tuesday, the committee agreed to let bank holding companies invest 15% of their revenues in nonfinancial assets. On Wednesday, the committee voted to let nonfinancial companies earn up to 15% of their revenues from banking assets. Any bank acquired by a nonfinancial firm would have to have assets under $500 million and be in business for at least five years. u

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