A recent Federal Reserve Board decision to let banks expand in data processing came too late to have much effect, experts say.

The central bank ruled that a U.S. unit of Paris-based Compagnie Financiere de Paribas could prepare customer bills and related reports for a cellular telephone company.

Had the decision come 10 or 20 years ago, it might have been celebrated as a revolutionary expansion of powers for banks that were chafing at the inability to sell the excess computer capacity in their back rooms.

Banks were restricted to doing what was closely related to their core business, such as payroll processing, corporate cash management, and computer support services for other financial institutions.

But in the ensuing years, many banks retreated from data processing, and outsourcing - the reliance on outside service bureaus - took hold. Meanwhile, many banks have been able to push into new areas such as health- care transaction processing without running afoul of existing regulations.

In that light, the Paribas ruling appears to be a special case, its significance as a legal precedent diminished. "For most banks, the Fed's constraints have been meaningless," said M. Arthur Gillis, president of Computer Based Solutions Inc., a New Orleans- based consulting firm.

"A lot of banks decided to get out of the data processing business not because of the Fed, but because they couldn't do outside data processing work well enough to make a significant profit."

Among the remaining bank-owned data processing providers, only M&I Data Services, a $300 million unit of Marshall & Ilsley Corp. of Milwaukee, is big enough to contend with nonbank giants like Alltel Information Services Inc., Electronic Data Systems Corp., and Fiserv Inc.

The Fed's Paribas order holds little significance for Joseph Delgadillo, president and chief operating officer of M&I Data, which already provides data processing, lockbox, and special application services for an electric power utility.

"I don't think we'll see a lot of bank-owned subsidiaries getting into new businesses they hadn't pursued before," Mr. Delgadillo said.

"The Fed's change essentially makes it easier to provide services to nonbank entities," he added. "For us, this is not a dramatic new business opportunity that didn't exist before," though it may make regulatory approvals "easier for these types of jobs."

Charles M. Horn, a lawyer in the Washington office of Mayer Brown & Platt, pointed out that the Fed in 1993 permitted Banc One to provide medical-claims processing services to insurance companies.

This had "less to do with banking than Paribas' billing-related data processing activities," Mr. Horn said. "Paribas' application must not have caused the board or its staff to lose much sleep."

Mr. Horn and others took some encouragement from the Paribas case as a sign that the Fed is keeping up with technological changes and the opportunities they bring banks in emerging areas of electronic commerce.

"As banking services become more electronic, this will keep banks as viable competitors in an evolving payments system," said James McLaughlin, director of regulatory and trust affairs at the American Bankers Association.

James Voss, chief technology officer at Huntington Bancshares, Columbus, Ohio, said the Fed's restrictions have inhibited his bank's pursuit of information processing opportunities.

"One decision does not constitute a dramatic change in direction," cautioned Mr. Voss. "It does give us reason to be hopeful that we can look at other opportunities, but we'll have to watch this one."

Huntington, he added, bailed out of data processing for its correspondent banks in the late 1970s because it was not very profitable. He said the Fed restrictions inhibited Huntington in later years and he hopes the Paribas ruling "indicates a liberalization."

A.J. Krail, president of Data Center Inc., a bank-owned processor in Hutchinson, Kan., said he has been prevented by regulations from pursuing nonbank business, such as a statement-rendering service for a retailer that was sending out 20,000 bills a week.

"We have expensive equipment to do this that sits idle for a lot of the time during the month, but we had to pass," Mr. Krail said.

Mr. McLaughlin at the ABA said he is optimistic that the climate is becoming favorable for joint processing ventures involving financial holding companies, subsidiaries, and third parties, with Fed approval or encouragement.

The advantage will be the ability to bring together technology "in a merging of interests, contributions, and benefits," he said.

Ms. Tucker is a freelance writer based in Hazlet, N.J.

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