A ruling by the Office of the Comptroller of the Currency may allow banks to sell insurance from urban areas-not just small towns with fewer than 5,000 people.

The controversial move may spur another lawsuit challenging the agency's authority to expand banks' insurance powers. However, the Comptroller's Office has a 4-0 track record in related cases decided by the Supreme Court.

"We believe this is a complete evisceration of the National Bank Act's small-town loophole," said Jeff Meyers, a spokesman for the Independent Insurance Agents of America.

"For the last 75 years there has been an understanding that Congress was referring to small towns when they enacted this. Once again, the OCC has turned history upside down."

Banking trade group officers were jubilant. "This means a bank insurance agency doesn't have to be in some cow town," said Joe Belew, president of the Consumer Bankers Association.

"It allows banks to provide insurance agency services to urban areas," said Richard Whiting, general counsel at the Bankers Roundtable. "This is good for the industry, because it gives banks increased flexibility to serve more customers."

However, the move is likely to raise the ire of House leaders who are grappling with legislation to reform financial laws. Though reaction to this development could not be obtained Tuesday, lawmakers have harshly criticized the Comptroller's Office in the past for expanding banks' powers too rapidly.

In an interview Tuesday, OCC Chief Counsel Julie L. Williams downplayed the move. "People who are surprised by this must not have been listening too carefully," she said. "This letter simply confirms what has been our practice for the last several years."

The letter she referred to was sent to Florida insurance regulators who asked for a definition of a "place of 5,000," which is how the National Bank Act defines where national banks may sell insurance. The Feb. 27 letter marks the first time the OCC has put this definition in writing.

Writing to the Florida regulators, Ms. Williams said, "The word 'place' clearly contemplates a 'place' that the Census Bureau has identified and for which a population total may be computed using census data."

Ms. Williams said "census designated places" are readily identified areas that may be inside city boundaries as long they have 2,500 or more inhabitants. In rural areas, census designated places must have 1,000 or more inhabitants. But these places would have to have fewer than 5,000 people to qualify. (A census designated place is different than a census tract, which can be as small as a block.)

Donald A. Dowdell, director of legal services for the Florida Department of Insurance, said it was to soon to predict whether the OCC's policy would allow banks to open insurance offices in neighborhoods of Miami and other Florida cities.

"This probably expands the envelope, but we need to study it more," he said.

Mr. Dowdell asked the OCC to spell out its "place of 5,000" definition on Jan. 23, after receiving a request from the Bank of Sarasota County to open an insurance agency in the town of Nakomis.

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