WASHINGTON - Federal regulators responsible for transforming the nation's financial laws are under pressure to write a slew of rules implementing the Gramm-Leach-Bliley Act of 1999.

Complex regulations governing bank operations often take years to complete, but the agencies' first deadline is March 12 - four months after the landmark law was signed by President Clinton.

"We have a very tight deadline," said Julie L. Williams, chief counsel for the Office of the Comptroller of the Currency. "We are working right now to identify what needs to be drafted."

Ms. Williams and her counterpart at the Federal Reserve Board, general counsel J. Virgil Mattingly Jr., will be the main forces behind the new rules.

"We're just beginning, and I think there are something in the neighborhood of 40 projects," Mr. Mattingly said Tuesday. "The most immediate concern is to get out certification procedures for financial holding companies."

Those procedures will, for the first time, permit banks, securities firms, and insurance companies to affiliate under financial holding companies, which the Fed will supervise.

Also attracting the regulators' attention are the law's privacy provisions, which give consumers the right to limit use of their financial information. Those rules must be in place by May 12.

"Six months to a final rule is a forced march - particularly in an area where there are bound to be unintended consequences," said Cantwell F. Muckenfuss 3d, a partner with Washington law firm Gibson, Dunn & Crutcher.

Beyond working under tight deadlines, regulators must interpret Congress's intentions where the law is vague.

"The way it's written, the act is pretty skeletal," said Jonathan L. Levin, a partner with the Reed Smith Shaw & McClay law firm in Philadelphia. "You don't want to put meat on the bones too quickly, because you don't know if you'll end up with Adonis or with Frankenstein."

The agencies won't be sculpting alone.

Trade groups, individual institutions, and consumer advocates will provide advice on hot-button issues, particularly the law's privacy provisions and its sections expanding bank powers.

"Privacy is going to be a flashpoint for everybody," Mr. Muckenfuss said.

Regulators have six months to issue regulations outlining the law's "opt-out" provision, which gives consumers the right to bar institutions from sharing their personal financial information with unrelated companies.

However, lawmakers did not define "financial information." Once the agencies define the type of information deemed private, they must create rules to protect it. Among them will be rules prohibiting disclosure of a customer's financial information to third parties for marketing purposes, and rules stipulating how a bank must store the data to prevent its being accessed illegally.

Banks will also be required to disclose those policies to new customers when they begin their relationship with the institution, and to all customers on a yearly basis.

New rules expanding bank powers are also expected to be contentious. The first title in the 416-page law creates financial holding companies that may own banks, securities firms, and insurance companies. Beyond banking and insurance and securities underwriting, these financial holding companies will also be allowed to provide merchant banking and anything else that the bill lists as a permissible financial activity.

Further, the Fed has the primary authority to expand the definition of "financial" to include future products and let companies engage in activities that are "incidental" or "complementary" to their financial powers.

However, the Treasury Department has the right to veto Fed rulings defining financial or incidental activities. In turn, the Fed may block similar rulings by Treasury regarding powers for national bank subsidiaries. The Treasury cannot block Fed rulings on complementary activities, which are restricted to holding company units.

These new financial holding companies require a rewriting of the Fed's Regulation Y, which governs holding company structure and operation. The most pressing concern is the creation of a process that will allow banks to be certified by the Fed as financial holding companies. The agency will also have to provide guideline for foreign banks that want financial holding company status in the U.S., including regulatory capital requirements and standards for management.

The revision of sections 23A and 23B of the Federal Reserve Act, which regulate a bank's ability to do business with affiliates, is also expected to attract scrutiny from the industry. The rule will need to specify the circumstances under which a bank may extend intraday credit to an affiliate, and place limits on transactions between banks and affiliates that involve derivatives.

The Fed also needs to set out procedures for prohibiting holding companies from launching or acquiring new lines of business if they have a less than satisfactory Community Reinvestment Act ratings. On a roughly parallel track, the Comptroller's Office is drafting rules to govern the expanded range of activities that the law will allow in bank subsidiaries. The scope is not as broad as that given to holding companies, but the so-called "financial subsidiaries" will be allowed to engage in activities such as securities underwriting and insurance sales. The law prohibits these units from underwriting insurance, insurance company portfolio investments, merchant banking, and real estate development and investment.

The OCC must establish a process for a bank to create a financial subsidiary that lays out what must appear in the filing, what the notice process will be, and how long the review period will last.

The agency is required to publish its plans for implementing the law by Aug. 20. However, Ms. Williams said those rules will be in place by mid-March, when the Fed's rules take effect.

The Comptroller's Office wants its rules to be as streamlined as the Fed's so banks will place their new powers in financial subsidiaries rather than holding companies. "We feel very strongly that this should be an expedited process, similar to that for holding companies," Ms. Williams said.

The OCC wants to keep financial subsidiaries at par with holding companies so the bulk of new bank powers do not gravitate toward holding companies. That could shift the balance of supervisory power toward the Fed.

The central bank does emerge as the top cop for diversified financial holding companies. Staking out his turf in a recent speech, Fed Chairman Alan Greenspan vowed to be "an active umbrella supervisor."

The Fed's focus, he said, will be on the health of bank affiliates and the risk management of holding companies overall. The agency will generally defer to functional regulators of individual financial activities, but will intervene to protect the health of a bank affiliate - including ordering divestitures, if necessary, he said.

Though the law was supposed to represent a compromise between the Fed and the Comptroller's Office, some expect the agencies to continue sparring as they write these rules governing new powers.

"The turf battle is not over," said Jake Lewis, who handles banking issues for consumer advocate Ralph Nader. "It will be renewed in the reg writing."

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