Banks should be allowed to develop new technologies without government interference, a senior bank regulator said Thursday.

James Kamihachi, senior deputy for economic and policy analysis at the Office of the Comptroller of the Currency, told House Banking's technology subcommittee that the market, not regulators, should decide whether or not innovations like on-line banking succeed.

"Emerging technology provides tremendous opportunities for improving the efficiency and quality of financial services," he said. "If we are to achieve these benefits, government must refrain from unnecessarily interfering."

Thursday's hearing was the first of a planned series about the impact of technology on financial services. "The savings book and the bank teller have gone the way of the hoola hoop," said subcommittee Chairman Richard H. Baker, R-La.

Not every bank innovation catches on with consumers, Mr. Kamihachi said. For example, though credit cards and automated teller machines eventually achieved wide acceptance, electronic money has not, he observed.

On-line brokerages are a more recent example of what he called a "breakthrough" service. Eleven of the country's 28 largest national banks offer on-line brokerage services through a subsidiary or affiliate.

Technology has had other impacts, he said. For bank holding companies, the ability to centralize transaction data has "added impetus" to the consolidation drive. New technologies have also led banks, particularly smaller ones, to outsource many products and services.

But new technologies have also exposed banks to new competitors and risks, Mr. Kamihachi and other witnesses said. For example, several nonbank on-line brokerages are planning to introduce electronic bill payment and presentment soon.

Dale L. Carleton, vice chairman of State Street Corp. in Boston, testified that banks now need to gauge "information risk," the possibility that consumers will question the quality or truth of information.

"Investors need to make well-informed choices," Mr. Carleton said. "Government can play a crucial role by providing a regulatory framework that drives full disclosure."

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