Providing regulatory relief is no easy task.

Just ask the Federal Reserve Board. The agency thought it could streamline its applications process to make it easier for bank holding companies to acquire some nonbanking businesses. Instead, it may end up making some mergers more costly and time-consuming.

The trouble centers on the Fed's proposed changes to Regulation Y, which would allow well-capitalized holding companies to skip the approval process altogether for some transactions. Instead, they would simply give 12 days' notice before acquiring many nonbanking businesses.

Congress and the President even endorsed this approach in the regulatory relief package approved in late September.

But standing in the way of the Fed's good intentions is the Hart-Scott- Rodino Antitrust Improvement Act of 1978, which gives the Federal Trade Commission jurisdiction over mergers involving companies with more than $100 million of assets.

This law requires companies to pay $45,000 filing fees and gives the FTC 30 days to review a deal. The agency can derail the transaction for even longer if it believes antitrust issues are raised.

Banks normally are not confronted by Hart-Scott-Rodino because the law expressly exempts any transaction that must be approved by a banking regulator.

But under the Fed's expedited rules, a banking regulator would no longer be approving each deal.

To Michael B. Mierzewski, a partner at the Washington law firm of Arnold & Porter, that spells trouble.

"It could kick you out of the exemption altogether," Mr. Mierzewski said. "In the worst-case scenario, you'll have to file under the Hart- Scott-Rodino law and pay the filing fee."

Mr. Mierzewski said his firm is studying whether a holding company could opt out of the expedited rules to save the $45,000 and the extended waiting period.

Not everyone buys Mr. Mierzewski's argument. Michael A. Greenspan, a partner at the Washington law firm of Thompson Coburn, said the Fed retains the power to block a deal. So a decision to let a deal proceed constitutes an approval, he said.

"This is tantamount to agency approval," he said. "The Fed is saying this is the procedure we will use to give our blessing to mergers."

But Mr. Greenspan said the 30-day notice may end up being the real problem. Hart-Scott-Rodino clearly requires a monthlong heads-up. The Fed's 12-day approval process won't pass muster, he said.

"This means that no matter how much the Fed speeds up, you still must wait 30 days," he said.

Mr. Greenspan also noted that Hart-Scott-Rodino requires some information to be filed after the transaction is announced. This could further delay deals, he said.

These types of problems frequently crop up in banking, said Karen Shaw Petrou, president of the industry consulting firm ISD/Shaw Inc. "There are always technical glitches and always unintended consequences arising from the best of efforts," she said. "That is the birth of the loophole."

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