WASHINGTON - Trying to appease irate European bankers, the Federal Reserve Board on Wednesday amended rules dictating how foreign banks may take advantage of the Gramm-Leach-Bliley Act.

But the concession may do little to soothe European bankers who fear the Fed is setting itself up as the de facto bank regulator to the world - and doing so in a way that puts foreign banks at a competitive disadvantage.

"We talk all the time about a world of global financial services, yet the regulation seems to say that the only market that really matters is the U.S. market," said John B. Richardson, deputy head of the European Commission delegation here.

In an interview this week, Mr. Richardson and Gerard De Graaf, the commission's first secretary, said the Fed's interim rule discriminates against foreign banks. They raised the possibility of taking action against the United States through the World Trade Organization if the Fed does not yield.

The Gramm-Leach-Bliley Act allows banks, brokers, and insurers to combine, but requires companies wishing to expand to create financial holding companies. The Fed was given responsibility for overseeing these companies and writing the rules governing their creation.

The Fed released a list of the first 117 institutions to qualify as financial holding companies on Tuesday. It included only nine foreign banks, and not a single one from Germany, France, or Italy.

"This is Exhibit A in our case against the Fed. The list of 117 banks is exactly what we feared," Mr. De Graaf said. "There are five European banks on the list, and we know of many more that have applied. We also know of banks that at the last minute decided not to apply because they felt that they would get stuck in the process. They were deterred by the Fed from applying."

Mr. De Graaf declined to identify any banks by name and said none would speak on the record about the Fed's rule for fear of revealing that their institutions do not meet the Fed's standards.

The rule contains a "leverage requirement" that would force foreign banks to hold Tier 1 capital equivalent to 3% of total balance-sheet assets, unadjusted for risk. As an alternative, a foreign bank may request that the Fed make a determination that its capital is "otherwise comparable" to what would be required of a domestic financial holding company.

No such leverage requirement exists in Europe, and the European Commission representatives claim that the Fed is trying to force foreign banks to hold more capital than their home country regulators think is necessary.

(The European Commission is an arm of the European Union that implements the economic coalition of European governments' policies.)

The rule also gives the Fed the discretion to evaluate a foreign bank's management - a job traditionally left to home-country regulators. "The Fed has far too broad discretion, and there is no indication that they will base their decisions on the judgement of the home country regulator," Mr. Richardson said.

The European officials claim that any foreign bank wishing to operate in the United States will effectively have to submit to Fed regulation of, not only its U.S. activities, but its home country activities as well. "It looks a bit like [the Fed is] turning away from everything that we have constructed multilaterally over the last years … towards an approach that gives the Fed much more discretion over everything," Mr. Richardson said. "That's very, very worrying."

The change made Wednesday addresses one of the foreign bankers' concerns.

Under the rules, a domestic bank is automatically approved to become a financial holding company on the 31st day after a request is filed, unless the Fed informs the bank that it does not qualify. Foreign banks, however, were required to wait until the Fed had examined them and determined that they were well-managed and well-capitalized. The Fed put foreign banks on the same timetable as domestic banks.

And more changes could be coming. Fed officials declined comment Wednesday, but comments are being accepted on the rule through March 27.

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