WASHINGTON - Rep. Jim Leach, the new chairman of the House Banking Committee, introduced legislation Wednesday that would eliminate the growth caps on grandfathered nonbank banks.

The Iowa Republican also would also drop the Glass-Steagall barriers that prevent banks and securities firms from owning one another. However, his bill would maintain the Bank Holding Company Act's separation between banking and commerce.

A separate bill introduced by Rep. Leach would permit the Federal Reserve to establish a self-regulatory organization to supervise derivatives dealers.

The provision would apply primarily to banks that deal in derivatives, since it would exempt registered broker dealers, which are regulated by other agencies, including the Securities and Exchange Commission.

Although Rep. Leach had promised earlier that he would introduce legislation to repeal the Glass-Steagall Act, the details - including his proposal for nonbank banks - did not emerge until Congress convened Wednesday.

In 1987, banks battled long and hard to close the so-called nonbank bank loophole, which had permitted Sears, Roebuck & Co. and others to own limited service banks. Such banks were permitted either to take deposits or make commercial loans, but not both.

Congress closed the loophole in the 1987 Competitive Equality Banking Act, but exempted existing nonbank banks. However, those grandfathered institutions were subject to a 7% annual growth limit.

By offering to eliminate the growth caps, Rep. Leach apparently is bidding for support from companies such as Sears and its Dean Witter Reynolds subsidiary that may not qualify to own a bank under the bill.

Aside from the nonbank bank provision, the Leach bill offers two other avenues for banks and securities firms that want to enter each others' business.

First, a securities firm could acquire insured banks by becoming a bank holding company. Those that did so would have to divest most activities not financial in nature within five years. A whole range of firewalls, or safeguards, would be applied to protect insured banks from risks undertaken by securities affiliates.

Securities firms could also become "wholesale bank holding companies" exempt from the firewalls that apply to bank holding companies. Such wholesale institutions could own a wholesale bank that makes commercial loans, but which does not take insured deposits. Securities firms taking that route would have access to Fed Wire and other elements of the payments system.

Republican aides said hearings could start as early as next month on the derivatives bill, the Glass-Steagall legislation, and other measures introduced Wednesday.

Among those other bills was a measure to consolidate the federal banking agencies. The legislation would merge the Office of Thrift Supervision and the Office of the Comptroller of the Currency into a new Federal Bank Agency.

The Federal Deposit Insurance Corp. would supervise all freestanding state-chartered thrifts and banks that are not members of the Federal Reserve. The Fed would retain authority for state-chartered, member banks and would be given supervisory power over bank holding companies with assets over $25 billion, as well as international banks.

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