Banks and thrifts should not retain exclusive access to payment systems if their powers are expanded, Senate Banking Committee Chairman Alfonse M. D'Amato said Monday.

Speaking at the convention of America's Community Bankers, Sen. D'Amato said Congress should be encouraging competition among financial service providers, not protecting monopolies.

His comments were critical of the united front in the banking industry to protect its payment system interests, the result of recent task forces organized by the American Bankers Association and the Bankers Roundtable.

"Existing institutions that fight for legislative restrictions to protect their markets are fighting the last war," the New York Republican told the thrift trade group. "Technology and new financial competitors from outside the traditional arena will be the catalyst for meaningful change and long overdue comprehensive financial modernization."

In an interview later, Sen. D'Amato said the financial industry will be more efficient if nonbanks have access to Federal Reserve payment facilities.

"We should be thinking about consumers and maximizing the potential of modern technology," he said.

Sen. D'Amato said Congress cannot justify legislation that locks out nonbanks while expanding bank and thrift powers.

"Banks say they want the ability to get into different areas like travel and insurance," he said. "Why is it a different stand for the payment system?"

The bank trade associations have argued that they, as regulated financial institutions, are the best custodians of system integrity and consumer interests.

"It's part of the infrastructure of our country," said James M. Culberson, chairman of First National Bank and Trust Co. in Asheboro, N.C., the ABA's past president and an active member of its payments task force. "I'm not real sure we're prepared to turn this over to people who are not regulated."

Sen. D'Amato also told thrift executives that Congress would expand industry powers with a new, common charter by the end of 1998. He said lawmakers are likely to preserve thrifts' broader branching and affiliation powers.

"Creating a more narrow common charter would run counter to the basic principles of financial modernization and the competitive needs of depository institutions," he said.

He also endorsed unitary thrift holding companies, nonbanks that own a single thrift. They demonstrate "that broader ownership affiliations can actually strengthen depository institutions through greater diversification and financial strength."

To applause from an audience of 2,000, Sen. D'Amato said the mutual form of depository institution ownership should be preserved. "Owner-depositors have a greater stake in providing credit to their communities," he said.

He said he would oppose any charter that forces thrifts to retain their focus on residential lending. "So long as an institution can make money without posing a risk to the deposit insurance fund, that choice should be decided in the marketplace, not by the law," he said.

Sen. D'Amato has strongly advocated removing the barriers between banking, other financial services, and general commerce. Since 1987 he has repeatedly introduced legislation to allow banks and commercial firms to affiliate.

But the rapid pace of technological innovation is making his once- radical proposal seem timid, he said. "I must question whether my bill is forward-looking enough," he said.

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