Banking lawyers are reading too much into a bank insurance sales decision that the Office of the Comptroller of the Currency released last month, according to the agency's chief counsel.

Julie L. Williams said that though National Bank of Commerce of Mississippi in Starkville was given permission to acquire two insurance agencies in towns with more than 5,000 people, the $780 million-asset bank must move them to smaller towns within two years. "They're not given any open-ended new treatment," she said. The bank must "conform or divest."

Banking lawyers had interpreted the approval as a sign the Comptroller's Office was moving toward a liberalization of its strict town-of-5,000 limits.

But even as written, the National Bank decision affords banks hunting for insurance agency acquisitions some added flexibility, according to David W. Roderer, of counsel at the Goodwin, Procter & Hoar law firm here. A bank will be able to acquire the agency it wants -- no matter where it is located -- and move it to a small town later. "It makes it a lot easier to make an acquisition go forward," Mr. Roderer said.

Another letter released last month by the OCC confirmed that bank-affiliated insurance agencies are not limited to selling insurance "within the place of 5,000," nor in their home state. In an interpretive letter to ABN Amro Insurance Services Inc. dated May 19, the agency said the subsidiary of Chicago-based LaSalle Bank may operate satellite offices in Illinois and Michigan.

"This is the first explicit authorization of interstate operations," said Richard M. Whiting, executive director and general counsel of the Financial Services Roundtable.

Last year the OCC allowed national banks in Louisiana to open satellite offices in bigger towns. Management of insurance agents must still be headquartered in a town with fewer than 5,000 people. Sales may be conducted anywhere, but core operations, such as applications processing, payroll, and recordkeeping, must be conducted in an agency's main office. These requirements were outlined in a 1996 letter to First Union Corp."There are a lot of arbitrary hurdles to go through to make this work," Mr. Whiting said.

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