Proposes Sweeteners in Controversial Branching Bill

WASHINGTON -- The Treasury Department is offering some regulatory relief in an attempt to gain bankers' support for an interstate banking bill.

Treasury is proposing to add measures to a branching bill that would ease a variety of laws that bankers claim are overly expensive and time consuming.

The measures, outlined by Treasury Under Secretary Jerome Powell in a meeting Tuesday with banking industry representatives, included:

* Repealing a provision in last year's bank bill that authorizes regulators to set compensation standards for bank officers.

* Scrapping new reporting requirements on loans to small businesses and farms.

* Delaying by at least one year new Truth in Savings disclosures for deposit accounts set to take effect in March 1993.

* Dropping a rule that forces auditors to attest to a bank's compliance with safety and soundness standards, and another that bars inside directors from serving on audit committees.

* Allowing rural banks with less than $100 million in assets to certify for themselves their compliance with the Community Reinvestment Act.

* Subtracting fully secured loans to bank officials from aggregate insider lending limits.

* Easing limits on interbank exposure for well-capitalized banks with less than $1 billion in assets.

At a May 11 meeting, Treasury had suggested it would look favorably upon a "home office protection" feature that would protect banks in towns of 50,000 or less from new competitors.

The Independent Bankers Association of America, which has vigorously opposed interstate branching, said it was reassessing its position as a result.

In an interview Thursday, Mr. Powell said regulatory relief "definitely will be a part of any interstate package that gets introduced." But he did not endorse any of the specific reforms.

"This project isn't going anywhere without broad support in the banking industry," he said. "We've tried to play a facilitative role in bringing in the disparate parts of the industry."

Meeting with Mr. Powell Tuesday were leaders of the American Bankers Association and the Independent Bankers Association of America. The same groups were at the May 11 meeting.

Trade Groups Split

Edward Yingling, ABA's top lobbyist, was less than enthusiastic when asked about the regulatory reforms, terming them "a series of small cleanup items."

But the IBAA is "very excited about the regulatory burden relief," said executive director Diane Casey. "These provisions would make a world of difference for a lot of small banks."

The Independent Bankers also want a provision subjecting thrifts to the same interstate limits that would govern bank activity, an idea Treasury was reported to be considering.

Although interstate legislation was presumed dead for most of this year, it took on new life this month with an agreement between a coalition of regional banks and the Independent Insurance Agents of America. They would overhaul the regulation of bank insurance activities and permit full interstate branching within three years, except in those states that opt out.

Compromise Taking Shape

The insurance agents view such legislation as the most convenient vehicle for setting limits on bank insurance activities. The regional banks believe that with the support of insurance agents, they have enough political muscle to move an interstate bill.

However, many community banks oppose interstate branching outright, while some large institutions oppose the compromise package because it would curb insurance activities. Other money-center banks fear that an interstate package would inevitably be amended to include restrictions on securities underwriting.

Last year, House Energy and Commerce Committee Chairman John D. Dingell, D-Mich., attached insurance and securities restrictions to a banking bill that included interstate authority. That bill died, suggesting to many observers that the insurance, securities, and interstate issues are linked in the eyes of lawmakers.

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