Comptroller of the Currency Eugene A. Ludwig urged bankers and legislators to think more broadly about financial services modernization.

Repeal of the Depression-era Glass-Steagall Act is a start, he said, but legislators need to move on to issues more crucial to the industry's future, such as electronic commerce.

"What I find discouraging is that - by focusing so much of our energy on Glass-Steagall reform - we are failing to deal with other issues even more central to modernizing our financial system," he declared in a speech Wednesday to the Exchequer Club.

The influence of technology has intensified competition between banks, nonbanks, and international financial institutions, Mr. Ludwig said. He pointed to stored-value cards as an example of an area in which banks may be left in the dust by nonbank competitors.

"Unlike a bank, that nonbank faces no minimum capital requirements, no liquidity standards," Mr. Ludwig asserted.

"Nonbank issuance of electronic value could present the banking industry with a competitive inequality far more significant to a far larger class of banks than anything now troubling the proponents of Glass-Steagall reform," he declared.

However, Mr. Ludwig added that banks have some important weapons in their arsenal.

"A key part of the answer lies in what consumers of all eras have always demanded - confidence in a payment system that offers security and guarantees privacy," he said.

As a result, America's banks are in a position to play a pivotal role in realizing the potential of electronic commerce, he added.

Unfortunately, he said, banks have too often been "on the receiving end of technology's growing influence."

Advances in technology will also strain the patchwork of state laws that many banks must adhere to, Mr. Ludwig argued.

It would be nearly impossible to figure out who has jurisdiction over a bank in one state making a loan to a consumer in another state through an Internet site located in yet another jurisdiction, he said.

"You can set up rules based on geography, but an answer derived from any set of geography-based rules will seem arbitrary," he said.

Mr. Ludwig also criticized the influence of special-interest groups in the shaping of financial services industry policy. He said legislators should instead follow free-market principles.

"For too long," Mr. Ludwig added, "the players in the policymaking drama have negotiated market restrictions and regulatory frameworks not on the basis of market realities and the level of risk, but like barterers at a trading bazaar."

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