The Office of the Comptroller of the Currency is free to expand bank insurance powers now that efforts on Capitol Hill to rein in the regulator have failed.

But will the Comptroller's Office take advantage of the opportunity? That's a tough call. Even though congressional attempts to slap a moratorium on the agency's ability to broaden bank insurance powers were unsuccessful, OCC officials are concerned about going too far, which could spur a backlash in Congress.

If the agency is too timid, it risks being upstaged by progressive states like New York, which is allowing its banks to sell insurance statewide from any size town.

These conflicting pressures could explain why the OCC has delayed for weeks the release of new instructions for banks selling insurance from towns with fewer than 5,000 people.

In March, the Supreme Court affirmed the OCC's decision that national banks, in this particular case, Barnett Banks Inc., may sell insurance from small towns. Though a huge victory for the industry, the case left open many questions.

Insurance industry officials argue that the case confines banks to selling insurance in the small towns. But two federal appeals courts have ruled that banks may sell insurance nationwide from a small town. Thus, the big question being asked of the OCC is how may national banks reach customers living outside the small town?

Can banks set up satellite offices in cities or must they use direct mail, telephone solicitations, or other indirect means to reach the masses?

In June, the OCC was expected to permit national banks to open branch offices of their small-town insurance agencies in cities.

But in an interview Friday, OCC Chief Counsel Julie L. Williams suggested that the agency may stop short of such broad authority.

"We're not sure how much of the details of the various types of questions we've been asked we're going to address," Ms. Williams said. "The vehicle for answering ... may not be conducive to going through the permutations of how one might market insurance."

There are 14 applications seeking authority to open small-town insurance from national banks, including units of First Union Corp., Mellon Bank Corp., and Banc One Corp.

The OCC refuses to release any details of the applications, such as how these banks are proposing to sell insurance. But Ms. Williams said the agency's clarification of the Barnett decision will be out by mid-October.

Banking industry representatives agreed that the OCC should be cautious.

No matter what the agency decides, it will be sued, said Bankers Roundtable general counsel Richard M. Whiting. An overly broad interpretation of the Barnett decision would only increase the probability that the insurance agents will win in court, he said.

Instead of ruling that national banks can open insurance agency offices outside of small towns, Mr. Whiting predicted the OCC wouldn't go further than allowing bank agents to meet with customers outside small towns and sell them policies.

"The would be wise to look at these incremental steps so as not to appear too overreaching and provide a big target for a challenge," Mr. Whiting said.

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