WASHINGTON - While large banks are taking advantage of new rules that let banks offer discounts when customers buy more than one product or service, small banks are holding back.

Regardless of size, banks agree the Federal Reserve Board's so-called tying rules are confusing.

Bankers do not know what is permitted and what is not, according to Richard Whiting, general counsel at the Bankers Roundtable.

"There are so many products and variations of products, especially those involving mutual funds, that you have to keep a scorecard," Mr. Whiting said.

That is literally what Bank of America is doing.

Patrick Antrim, senior counsel at the unit of BankAmerica Corp., has developed a matrix to show employees what products can be tied and in what cases.

"It was getting so complicated, we had to develop this," Mr. Antrim said of the one-page chart. "You have to have something in front of you."

Still, Mr. Antrim said, the advantages of being able to offer discounts and cross-sell products outweigh the hassle.

"It makes it a lot easier for a multifaceted company to provide beneficial products to customers," he said.

The tying rules are part of Regulation Y, which generally bars banks from requiring customers to buy one product in order to get a discount on another.

The Fed began chipping away at the limits in 1993, reacting to bankers who claimed the rules hinder competition with nonbank financial firms.

In December 1993, the Fed allowed First Union Corp. to offer discounts on brokerage commissions if a customer bought a traditional bank product, such as a loan or deposit account.

The Fed extended that exemption to all banks last September and broadened it to include mortgage, brokerage, or insurance subsidiaries.

The central bank pushed a little further in January, permitting both bank holding companies and nonbank affiliates to offer product discounts if the customer buys any other product from either one. This ruling freed nonbank affiliates to bundle their services and offer discounts, even if the customer does not do business with the bank.

Yet another tying rule is pending. Proposed Oct. 26, this new rule would extend the exemption to products within a bank as long as a customer maintained a minimum deposit balance. The rule is expected to be adopted within months.

To keep all this straight, most large banks are training employees, from tellers to senior managers.

At NationsBank Corp., the legal and marketing departments worked together to draft training procedures, said Ellison Clary, a spokesman.

First Union will hold four training sessions this spring dedicated to compliance with tying rules. The sessions will be transmitted by satellite to its 1,300 branches.

If larger banks are having problems complying with the rules, small banks are at a loss.

Most community banks are not even close to putting together tying programs, said Diane Casey, executive director of the Independent Bankers Association of America.

"There is a long learning curve on what they can and cannot do," she said.

The IBAA opposed any relaxation of tying rules, arguing that a loosening would put smaller banks at a competitive disadvantage.

Anthony Abbate, president of Interchange State Bank, a $480 million- asset institution in Saddle Brook, N.J., said he's consumed with Community Reinvestment Act and fair-lending compliance issues.

"Right now, tying is the furthest thing from my mind," Mr. Abbate said. "Survival is on my mind."

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