Industry consolidation, not stored-value cards and Web pages, is what worries regulators about national banks' technological advances.

"The press has been focusing on new delivery methods, but smart cards and Internet banking are just symptoms of a much more fundamental change," says James D. Kamihachi, senior deputy comptroller for economic and policy analysis.

As banks merge, Mr. Kamihachi says their computer systems may not be able to communicate with one another. "New bank management has to understand its true risk position," says the comptroller's electronic money guru. "This is the area where I have the most concern. You have to ask, 'What do we know about the integrity of the information upon which key management decisions are reached?'"

Not only are banks developing new, high-tech products, but they are increasingly relying on computers for all of their operations, Mr. Kamihachi says. "There is some danger if you focus just on retail delivery, that you'll miss the bigger picture," he says.

He also wants to ensure that banks develop strong internal controls as they increase their reliance on computers.

"Many security weaknesses will not be the failure of technology, but the failure of management at key points of vulnerability," he says. "If you have encryption, who holds the key? Who has access to passwords?"

The Office of the Comptroller of the Currency will issue exam guidelines for national banks' technology operations-both internal and retail-by yearend. Why is the agency waiting when the Federal Deposit Insurance Corp. released its guidelines Jan. 29?

"We have to think hard about what we are trying to accomplish," he says. "We just can't afford to impose unnecessary burdens on banks, because they just won't be competitive."

That attitude brings praise from experts in the electronic banking field. "I am impressed with Jim because he has a very good sense for how these technology issues should be interpreted into examiners' directions," says Thomas P. Vartanian, managing partner at Fried, Frank, Harris, Shriver & Jacobson.

One of the agency's biggest challenges will be ensuring that examiners stay up-to-date on the latest technological advances. It's a challenge that bankers also must face, Mr. Kamihachi says.

"The bankers who really understand the implications of technology on the business side of the bank are going to succeed, while those who don't just aren't going to be there," he says. "As regulators, we're going to have to keep up in that world."

Mr. Kamihachi came to the Comptroller's Office in 1988 after four years at the Office of Management and Budget, where he managed the agency's economic staff.

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