The government must prepare for the expansion of electronic banking, but excessive regulation would stifle innovation, Eugene A. Ludwig, comptroller of the currency, said Wednesday.
"It is incumbent on any responsible policymaker to exercise discipline in not rushing to make new rules until there is a genuine need to do so," the national bank regulator said before an American Bankers Association conference.
Mr. Ludwig, who is coordinating the administration's positions on electronic money, said no immediate need appears for rules on computer banking.
Only a "modest amount" of electronic-money business and Internet banking is being conducted today, Mr. Ludwig said. He estimated that this technology won't take off for two to five years.
"Change is coming more slowly than the current hype would lead us to believe," he said.
New technologies are a moving target for regulators, Mr. Ludwig said: "It is extremely difficult to predict ... which products should be the focus of our attention." He added that regulators must consider long-term implications.
Although advances in technology transcend state and national borders, the laws and regulations governing what state and national banks can and cannot do are grounded in geography.
Mr. Ludwig said today's forays into electronic banking will define how future financial transactions are conducted.
"It is essential that government continue to be aggressively on top of new developments so that, when it becomes necessary to act, it can do so with a scalpel and not a meat ax," he said.
Mr. Ludwig said he is examining potential electronic-money problems - including criminal activity, consumer rip-offs, and deposit insurance losses.
In a speech at the same conference, Rep. Michael N. Castle, R-Del., exhorted banks to remain competitive in the electronic-money market.
"We need to ride this new wave of financial technology instead of turning our backs and allowing it to crash down on our heads in a few years," said Rep. Castle, who is chairman of House Banking's domestic and international monetary policy subcommittee.