Community bankers are opposed to changing the nation's deposit insurance system and are counting on Thomas E. Hales to spread that message in Washington today.

Mr. Hales, chairman and chief executive officer of Union State Bank in Orangeburg, N.Y., will represent community banks at a symposium on reforming the 65-year-old deposit insurance structure.

Some large banks are pushing to limit government intervention in banking by essentially privatizing the Federal Deposit Insurance Corp., but Mr. Hales plans to argue that such a move would alienate customers.

"Why would we want to take this away from the consumer?" Mr. Hales asked in an interview this week. Do large banks "really think that their customers won't be upset by this?"

Arthur J. Murton, director of the FDIC's division of insurance, said the agency is holding the symposium to discuss whether the government's guarantee needs to be updated to reflect the financial services industry's rapid evolution.

"We think the current system has worked well and does work well," Mr. Murton said, "but we're also cognizant of the fact that there are major changes taking place in the financial system. We felt it was important for the FDIC to be part of the process."

That process began last spring when the trade group for the nation's 125 largest banking companies recommended that the government get out of the business of rescuing failing banks. In a 67-page report, the Bankers Roundtable suggested limiting deposit insurance coverage to $100,000 per person, per institution-as opposed to $100,000 per account-and terminating the industry's $30 billion line of credit with the Treasury Department.

Doing so, Roundtable members argued, could lead to less regulation. But Mr. Murton played down that possibility.

"There is this feeling that if you got rid of deposit insurance you'd get rid of supervision," he said. "A lot of people question the validity of that. There was bank supervision before there was an FDIC."

Community banking groups claim that private insurance would not work in a crisis. "If you have large bank failures, then you need the unlimited resources and credibility of the federal government to back the system," said Karen M. Thomas, director of regulatory affairs at the Independent Bankers Association of America.

Mr. Hales said he is surprised large banks are in such a rush to revamp the FDIC when no one really knows how the marriage of banks and brokerage firms will ultimately play out.

"It would seem to me that this discussion is five to 10 years premature," Mr. Hales said. "Let's see if it works."

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