WASHINGTON - Bankers and lawmakers must consider how the industry will expand once the Glass-Steagall Act is repealed, Federal Reserve Board Governor John P. LaWare said on Tuesday.

Mr. LaWare, addressing participants at the Independent Bankers Association of America conference in Honolulu, said the industry is confronted with two choices.

First, it can opt for the financial holding company approach. Under this plan, a holding company could operate separate banking, insurance, real estate brokerage, and security subsidiaries.

"This format offers the possibility of limiting or even prohibiting the use of the insured bank for funding the other businesses, thereby insulating the insured deposits," Mr. LaWare said.

Or, it can turn to the universal bank structure, which allows banks to use insured deposits to directly operate other businesses.

"Objective analysis might convince even those in Congress most opposed that the universal bank is the most efficient and competitive financial organization, and with proper supervision could operate with no more inherent risk than a financial services holding company," Mr. LaWare said.

A host of regulatory schemes, varying from the current set-up to a superregulator, could supervise either creation, he said.

Regardless of the structure, integration is coming, he said. "In that context, I think the future for community banks is as bright as for the big guys," Mr. LaWare said.

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