WASHINGTON - Federal Reserve Board Governor Laurence H. Meyer has rebutted claims that rules implementing the Gramm-Leach-Bliley Act put foreign banks at a competitive disadvantage.

In a polite yet firm letter to a European Commission official, Mr. Meyer challenged claims - point by point - that foreign banks seeking financial holding company charters are being held to a higher standard than U.S. banks.

The new reform law created financial holding companies as the vehicle for common ownership of a bank, a broker, and an insurer. The Fed's interim rule laying out the conditions for chartering a financial holding company was released Jan. 19. Though changes may still be made, it took effect March 11. To date, 155 financial holding companies have been formed; 13 by foreign banks.

Among the Europeans' main concerns is a provision requiring foreign banks to maintain Tier 1 capital equal to 3% of total assets. European bankers argue that such a leverage requirement is unfair to their banks, which tend to hold lower-risk assets than U.S. banks and therefore hold less capital.

But Mr. Meyer said U.S. banks are subject to a higher leverage ratio, 5%. The Fed also created an alternative: Foreign banks that cannot meet the standard may present other evidence that they have a strong capital base. Mr. Meyer said the Fed has already allowed two foreign banks to use this option to charter financial holding companies.

"This alternative process is not available to U.S. banks, and failure by a U.S. bank to meet the leverage ratio is an automatic disqualification," Mr. Meyer wrote.

The Gramm-Leach-Bliley Act requires the Fed to apply U.S.-style capital and management standards to foreign banks seeking to establish financial holding companies. In the letter, dated Monday but released Tuesday, Mr. Meyer said that the Fed's interim rule outlines a "fair and flexible process."

As evidence, Mr. Meyer noted that 13 of the 15 foreign bank applications have been approved. Two were withdrawn for reasons unrelated to capital or management issues, he said. Several U.S. institutions have had their applications rejected outright, Mr. Meyer added. "U.S. banks do not receive an automatic pass through the financial holding company process," he noted.

Mr. Meyer sent his five-page response to John F. Mogg, the European Commission's director general for financial services, but in it he addressed concerns that had been expressed by many European banks and trade groups in comment letters to the Fed.

Mr. Meyer also rebutted claims that applications from foreign banks take longer to process or that the Fed's rule forces foreign regulators to apply U.S. supervisory rules to determine which banks are well-managed.

Representatives of the European Commission did not return requests for comment. But Lawrence R. Uhlick, executive director of the New York-based Institute for International Bankers, said that his membership continues to disagree with the Fed's insistence on a leverage ratio.

"We think comparability can be achieved, particularly with regard to capital, by using the internationally agreed upon standards of the Basel Committee, and not a U.S.-specific test that these banks have never had to work with," Mr. Uhlick said.

"Other countries and other regulators have different ways of measuring the capital adequacy of financial institutions that can be equally valid," said Joseph T. McLaughlin, executive vice president for legal and regulatory affairs at Credit Suisse First Boston Corp.

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