With the close of business on Jan. 3, banking regulators had a reasonably good idea of just where things stood with relation to the vaunted Year 2000 date change. But it will be another month or two, perhaps, before Y2K-related concerns will be whittled to the point where regulators can put renewed focus on the Internet, where many of banking's biggest new technology initiatives are underway. For the federal banking agencies, it's largely uncharted territory. Transactional Web sites are mushrooming, and the issues they raise haven't been standard material on examiners' crib sheets. The Internet has often been referred to as a kind of Wild West, where almost anything goes and new frontiers are broached every day. For a tightly regulated industry like banking, uncertainty and galloping change creates anxiety, for both institutions and the regulators doing the policing.The Internet also adds a new dimension to ongoing power struggles between state and federal regulators and power blocs such as the United States and the European Union.

Cyberspace renders the idea of a bank's geographic operating area meaningless, even though the laws that banks operate under address physically circumscribed areas. "It used to be that interstate banking was the Holy Grail. The next Holy Grail is Internet banking," says Mark Plotkin, a partner in the Washington, D.C., law firm of Covington & Burling. "The ultimate battleground will be international."

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