Showing unexpected flexibility on a foreign banking issue, the Federal Reserve Board gave Promstroybank of Russia permission Monday to establish a representative office in New York.

The Fed said the Moscow-based bank, which the government privatized in 1992, is not subject at home to comprehensive supervision on a consolidated basis as required by the Foreign Bank Supervision Enhancement Act.

Yet the Fed said it could approve the office because the Russian bank will only use it to market itself, develop business relationships, and solicit loans for the parent bank in Russia.

The Fed also said the Russian Federation had taken steps to strengthen banking supervision, enacting laws and requiring annual external audits.

Banking lawyers said the order reflects a new atmosphere at the Fed. "If the Fed has confidence the bank is on relatively stable ground and the supervisors are trying to move in the right direction, then the Fed might be flexible," said Gil Schwartz, a partner at Washington's Schwartz & Ballen. "It does give hope for banks from other countries."

U.S. foreign policy interests also were at stake, according to Steven M. Lucas, a partner at Winston & Strawn. "Rigid application of the criteria in this case would just exclude Russian banks altogether," Mr. Lucas said. That would not help efforts to integrate Russia's economy with the West, he said.

Also Monday, the Fed approved three other applications. It gave First Hawaiian Inc., Honolulu, permission to expand into the Pacific Northwest, saying the company could acquire 31 branches from U.S. Bancorp in Oregon, Idaho, and Washington. It also approved the bank's bid to establish a branch in Washington.

The Fed also gave Farmers State Corp., Mountain Lake, Minn., permission to buy First Security Bank, Madison, Minn. The new bank will control $177 million of deposits.

Finally, the Fed approved a bid by Woodforest Bancshares, Houston, to buy 80% of the voting shares of Mutual Money Investments Inc., Houston. The affiliate will underwrite government obligations and provide brokerage services.

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