As talks on Glass-Steagall legislation lumber on, large banks are asking lawmakers to forbid state regulators from discriminating against their insurance offices.

"We must have a totally level playing field," said Robert W. Gillespie, chief executive officer of KeyCorp in Cleveland.

Mr. Gillespie and other bankers fear that, without the anti- discrimination provision, state regulators can effectively keep national banks from selling insurance by imposing more restrictive conditions than apply to other providers.

The Bankers Roundtable, which represents KeyCorp and other large banks, would oppose any deal that limits the Office of the Comptroller of the Currency's ability to grant banks new insurance powers if the industry isn't protected from discrimination by state regulators, Anthony T. Cluff, the group's executive vice president, said Wednesday.

The Roundtable plan was presented to the staff of the House Banking Committee Dec. 22, and has been the subject of talks with lawmakers and the insurance industry since.

An agreement between the two industry groups is necessary because House Speaker Newt Gingrich won't bring the Glass-Steagall bill to a vote if it is likely to divide Republicans.

In one measure of how far apart the two sides are, House Banking Committee Chairman Jim Leach wrote to Chase Manhattan Corp. chairman Thomas G. Labrecque Friday to suggest that it may be time to bring the talks to an end. Neither Chase nor Rep. Leach could be reached for comment about the letter.

While the bankers said they want only to play by the same rules as other insurance sellers, their opponents argue that the industry essentially wants to avoid all state regulation.

"They want a completely unregulated insurance market for banks," said Robert Rusbuldt, lobbyist for the Independent Insurance Agents of America.

Mr. Cluff acknowledged that the insurance industry may be reluctant to accept the latest proposal, but said his group is adamant.

"This is rock bottom for us," he said.

Bankers often complain that regulators can prevent them from selling insurance, even in states that allow banks to enter the business. "There are a million ways an insurance commissioner can discriminate against banks," one lobbyist said.

The Roundtable has not made public its latest proposal, but a bank lobbyist familiar with the talks said the plan would allow states to regulate the "manner" in which banks sell insurance but not the "extent."

To bankers, this means states could license and collect fees from banks selling insurance, but could not limit their products, the source said.

But insurance industry groups say the Roundtable proposal would allow banks to virtually escape state regulation.

"We believe there should be reasonable constraints on state regulators, but the banks seem to want states as far off the map as possible," said Gary Hughes, general counsel at the American Council of Life Insurers.

Despite the gap between the Roundtable and the insurance industry, Mr. Cluff said his group won't discuss other sticking points, such as the Comptroller moratorium and the definition of insurance, until an antidiscrimination agreement is reached.

"Our objective is to achieve something that will establish nondiscriminatory authority for state regulators. We will address those other issues later," he said.

KeyCorp's Mr. Gillespie agreed. "There must be a willingness to move forward with antidiscrimination language before the moratorium is even considered," he said.

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