States should be the primary regulators of bank insurance sales, Rep. Michael Oxley, chairman of a House Commerce subcommittee, said Thursday.

"I guarantee you there will not be any change in state insurance regulation," the Ohio Republican said after his subcommittee held a hearing on financial reform.

Executives from several securities firms told the subcommittee that Congress must move quickly because regulators have allowed banks to move into their businesses.

"The ability of securities firms to enter the banking business remains limited," complained James F. Higgins, president and chief operating officer of Dean Witter Financial, a unit of Dean Witter, Discover.

The executives said Congress should not allow bank regulators to supervise insurance and securities sales by banks. They also argued that the Federal Reserve Board should not be the primary regulator of financial services holding companies. Fed supervision "will create inefficiencies" and "potentially interfere" with the competitiveness of nonbanking businesses, said Arnold D. Scott, senior executive vice president of Massachusetts Financial Services Inc., a mutual fund company.

Thursday's hearing was the first of several that Rep. Oxley plans to hold. The Commerce Committee must approve any financial reform bill that is passed by the House Banking Committee.

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