The race among top-tier banks to establish securities subsidiaries is in its final lap.

Wachovia Corp. of Winston-Salem, N.C., established a section 20 securities unit last week, making it one of the last large commercial banking companies to obtain underwriting powers from the Federal Reserve.

Wells Fargo & Co. is the only top 25 bank holding company, in terms of assets, without a section 20 subsidiary. Last week it announced plans to merge with Norwest Corp., which has had section 20 powers since 1989.

Wachovia executives plan to transfer most of the bank's trading operation into the new subsidiary, Wachovia Capital Markets Inc. The only trading desks it will not transfer are those that would impact the unit's capital requirements, including the bank's foreign exchange and derivatives trading operations.

John C. McLean Jr., Wachovia's executive vice president in charge of capital markets, said the bank has wanted to expand its capital markets powers for years.

"We were waiting to see how the regulatory changes took shape," Mr. McLean said. The Fed loosened restrictions on bank underwriting last year.

Wachovia executives plan to apply to the Fed this year for the authority to underwrite corporate bonds, and hope to have those powers by the first quarter of 1999.

They do not plan to seek equity underwriting capabilities. The Fed can grant either or both to Tier 2 applicants.

The powers Wachovia received from the Fed this month let it underwrite municipal revenue bonds, asset-backed securities, securities backed by one- to four-family mortgages, and commercial paper.

Wachovia will focus on revenue bonds and commercial paper.

In 1995, Wachovia's capital markets division created a loan-backed commercial paper product called Centric Capital. Lehman Brothers has been the registered broker-dealer and market maker in Centric, which has $4 billion to $5 billion in short-term collateralized loan obligations on the market.

"We will keep the relationship with Lehman because they have market- making capabilities," Mr. McLean said. But he said Wachovia would take part of that in-house now. It plans to raise Centric's outstanding issuance to $6 billion to $7 billion.

Wachovia has underwritten government general obligation bonds throughout the Southeast for decades. Bank executives hope to leverage those relationships to underwrite municipal revenue bonds.

"We felt more or less stymied not being able go after the more profitable side of the business," said Ranjana Clark, Wachovia's senior vice president in charge of strategic planning for capital markets.

The bank's capital markets staff grew about 20% during the last year, to 230. It is transferring 80 of those employees - primarily bond sales and trading staff-into the new section 20 unit.

Bank executives have no plans to expand the staff because of the new powers but will concentrate on getting employees up to speed. But Wachovia would hire employees to expand into corporate debt underwriting when the time comes.

"We would need to hire a few people who have some experience in that line of business to jump-start the transfer of knowledge," Mr. McLean said.

Ms. Clark said the move into corporate debt underwriting would improve Wachovia's standing with both corporate issuers and institutional investors.

"We haven't been able to build up the investment client base as aggressively as we'd like because of our limited product set," she said.

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