WASHINGTON - Senate Banking Committee Chairman Alfonse M. D'Amato is expected to introduce a bill this month that would allow banks and nonfinancial companies to get into each others' business.

The measure is likely to look much like the Depository Institution Affiliation Act that the New York Republican introduced in 1989. That bill aimed to amend the Bank Holding Company Act to allow any type of business to own a financial institution, and vice versa.

Proponents of such broad financial industry reform say that the distinction between commerce and banking is starting to blur to such an extent that a healthy industry will need room to expand into other areas of service, free of outdated barriers.

"We've determined that it is very difficult to come up with a definition of financial services," said Sam Baptista, president of the Financial Services Council. "Look at American Express. It engages in financial services, but it's also in the travel business and publishing.

"This bill would create a structure that will allow for the industry to evolve and progress and serve customers however they need to be served," he added.

While banking groups have traditionally been wary of allowing financial service companies to affiliate with nonfinancial companies, many industry representatives are waiting to see how Sen. D'Amato's bill reads before voicing any strong opinions about it.

"We're not initially opposed to Sen. D'Amato's bill," said Joe Belew, president of the Consumer Bankers Association. "The goal is Glass-Steagall reform, and whatever else comes along. We'll see.

"In point of fact, a lot of commercial entities already own banks; there are just serious differences in terms of how many and what kinds of owners there are of banks," he added.

Some bank group representatives see the prospect of exposing federal deposit insurance funds to possible downturns in industrial or commercial markets as a dangerous one.

"If Chase is owned by General Motors, and GM has a bad year, you expose consumers to losses," said Ron Ence, director of legislative affairs for the Independent Bankers Association of America. "The risks are so different in banking and commerce."

Nevertheless, a measure mandating reform as broad as what the D'Amato bill proposes does not have much chance of success, according to some industry watchers, particularly because House Banking Committee Chairman Jim Leach has long contended that commercial and industrial companies should not own banks.

"Leach is quite strongly opposed to combining financial services and commerce," said Karen Shaw, president of ISD/Shaw Inc., a financial services consulting firm here that tracks bank legislation and regulation. "I wouldn't think it has a chance of passing."

However, Mr. Baptista, whose group counts American Express Co., Citicorp, and Merrill Lynch & Co. as members, is dedicated to enacting legislation allowing banking and commerce to mix, and he does not see Rep. Leach's opposition as insurmountable.

Rep. Leach last week introduced a measure that would reform the Glass- Steagall Act. One provision of the Leach bill would allow bank holding companies to engage in activities that the Federal Reserve deems "financial," Mr. Baptista said.

"There is a lot of room when you look at Leach's bill; it has the potential for the Federal Reserve to expand the definition of financial services," Mr. Baptista said. "Congressman Leach has drawn a line between banking and commerce, but we have to find a way of working with him."

Although Rep. Leach's bill "clearly doesn't go as far as we'd like it to go," Mr. Baptista said, it is a good starting point.

"Naturally, the product coming out of the House is going to be different from what comes out of the Senate. That's what conferences are for," he said.

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