In a call to arms, the heads of the Fed, the Comptroller's office, and the FDIC urged bankers here to battle for expanded powers.

"The future requires action," Comptroller of the Currency Eugene A. Ludwig said at the American Bankers Association's annual convention. "Carpe diem - seize the day."

Mr. Ludwig, Federal Reserve Chairman Alan Greenspan, and Chairman Ricki Helfer of the Federal Deposit Insurance Corp. said in speeches Saturday that Congress must modernize financial services laws and let banks enter new businesses.

"Statutory provisions ultimately limit the Fed's ability to relax section 20 or Regulation Y limits," Mr. Greenspan said. "Fundamental congressional reform of the Glass-Steagall and Bank Holding Company Act is still needed."

Ms. Helfer said the recent thrift fund recapitalization removes a barier to congressional action on modernization. "We can now all look to the future with greater assurance, and focus on the competitiveness and other issues that deserve and require our attention," she said.

Continued record profits are possible if banks maintain credit quality, expand off-balance-sheet businesses, and diversify their product offerings, she said. "The prospects for banks would be brighter if you are allowed to function effectively in the marketplace to offer credit and investment opportunities more broadly," she said. "That is a legislative issue that deserves the immediate attention of the new Congress."

The industry made a start toward modernization this year when it kept insurance sales restrictions out of the thrift recapitalization bill, Mr. Ludwig said. But the insurance lobby will renew its legislative push in January, he said. "Even as we look back over our shoulders to fight off efforts to push banking backward, we must also look to the future, see where we need to go, and keep moving," he said.

Mr. Greenspan devoted most of his remarks to risk management, saying the industry must learn to better quantify the amount of risk inherent in each transaction if it hopes to expand its product offerings.

"A bank that properly measures its risks and allocates capital to those risks is well on its way to being a safe and sound bank, as well as one that meets its shareholders' objectives," Mr. Greenspan said.

Mr. Greenspan also urged bankers not to fear credit scoring and securitization. These devices allow national lenders to enter local markets, he said, but they also reduce costs and increase profitability.

"Competition is the force which keeps us on our toes, makes us better and more productive, and creates higher market values for our banking organizations," he said.

Mr. Greenspan added that the cost of credit scoring systems has dropped so much that even the smallest of banks can now afford to implement them.

The regulators also focused on technology. Ms. Helfer said banks are using computers to reduce personnel costs. In 1986 the average bank had $2.5 million in assets per employee. Today, the figure has shot up to $3 million, she said.

Until Congress frees banks from binding laws, the regulators pledged to help. Mr. Ludwig said his agency would act shortly on a proposal providing banks an opportunity to underwrite securities directly. "We have taken those plans off the shelf, dusted them off, and reexamined them," he said. "I'm confident that decisions will be made on those plans within in the next several weeks."

Mr. Greenspan said the Fed may allow banks to decide how much capital is needed to back certain assets. For example, a bank could determine what reserves to hold against swings in the value of its securities portfolio. Banks that miscalculate would pay a fine. This system more closely mimics the market, which punishes companies that make mistakes, he said.

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