As banks spread their wings, a call for caution is raised

The shake-up under way in the banking world promises to have a major effect on how financial services are delivered. Banks are moving aggressively into new lines of business - and trying to sell their services in a wider geographical area - as regulators and Congress scramble to keep up. Meanwhile banks are facing competition from businesses outside the banking community.

The deregulation of banking ''holds out the promise of enormous gains to come for smaller (bank) customers,'' says Samuel Chase, a Washington-based banking consultant. The gains will be in improved services and more competitive rates.

Others are less sure that a more freewheeling bank industry will benefit consumers. ''It could result in increased competition in many markets and improved services. (But) that's what I would call the Polyanna view,'' consumer activist Ralph Nader says.

At a conference this week on bank deregulation, which Mr. Nader sponsored jointly with the banking industry, he called for greater disclosure of bank performance data to counter the potential negative effects of deregulation. ''The pattern of deregulation seems inexorable,'' Mr. Nader says. ''The question now is how fast and in what direction.''

Banks have clearly been on the move. In late March, Citicorp, the second-largest bank holding company in the United States, said it was planning to acquire a bank in South Dakota in a bid to enter the insurance business. South Dakota law allows certain banks to engage in insurance operations.

Earlier this year Chase Manhattan Bank entered the stock brokerage business by acquiring Rose & Co. The move followed BankAmerica Corporation's 1982 purchase of Charles Schwab & Co., the nation's largest discount brokerage house.

The banks have entered the brokerage business to establish a beachhead from which to move into other, more profitable securities operations like underwriting and distributing new stock issues for corporations.

Meanwhile some states, including Maine and New York, are now allowing out-of-state banks to enter their markets on a reciprocal basis. As a result, the Bank of Boston recently bought the Casco Bank & Trust Company in Portland, Maine.

At the same time banks are branching out, competition in financial services is coming from new areas. Last week, for example, Sears, Roebuck & Co. said it was considering acquiring banks or savings-and-loan associations.

The change in the pattern of banking activity has taken place without radical revisions in two key banking laws. The Glass-Steagall Act of 1933 put a wall between the banking and brokerage businesses. Brokerage houses could not take deposits and banks could not underwrite or distribute new securities, although they could buy and sell stocks for customers. Until recently they were relatively minor players in the securities industry.

Also, Congress has not scrapped the McFadden Act, which confines banks to taking deposits in a single state. Their ability to move into other states has been acomplished under rapidly changing state law.

Congressional committees are gearing up for revisions of both major banking acts. The House Banking Committee is expected to hold hearings on deregulation this year, although ''the schedule is not set yet,'' a committee source says.

Meanwhile the Senate Banking Committee has already held hearings on deregulation and plans another series in June which will focus on changes in the McFadden and Glass-Steagall Acts. Chairman Jake Garn (R) of Utah plans to ''introduce a bill late this year or early in the next session with the intention of (passing it) during the next calendar year,'' a committee source says.

Some community activists worry that less regulation will lead to a fewer number of banks having greater power over investments in local neighborhoods. ''The determination of the viability of communities will be made in the board rooms of the largest companies,'' warns Allen J. Fishbein, director of the Neighborhood Revitalization Project in Washington.

Members of industries the banks are entering are also worried. ''Each time you allow a bank holding company to go into a new activity, it will dominate it, '' says Matthew Fink, senior vice-president of the Investment Company Institute, which represents mutual funds. He says a key reason for the bank's advantage is the pressure potential borrowers feel to deal with the bank.

Securities dealers argue that abuses could arise if banks underwrote securities. For example, they say, a bank may feel pressured to sell stock for a troubled company to which it has made large loans. ''I don't think human nature has changed that much since passage of Glass-Steagall,'' says Donald J. Crawford , senior vice-president of the Securities Industry Association.

The insurance industry opposes regulatory changes that would allow banks to broaden their insurance offerings beyond creditor life insurance. The insurers' main concern is that banks would engage in ''tied sales,'' in which access to loans or other service would be tied, in the purchaser's mind, to taking insurance from the bank.

The movement of banks across state lines is also controversial. Some see significant benefits to consumers in the form of more competitive rates. And banks with out-of-state ties may also have an easier time raising funds. ''The deregulation (of interest rates) has created great public benefits which can only be preserved through other areas of deregulation,'' says John M. Daigle, president of Casco, the bank that recently merged with the Bank of Boston.

But small bankers fear the influx of huge out-of-state banks. ''Relaxing branching regulations leads to increased concentration,'' argues Jack King, second vice-president of the Indepdent Bankers Association of America. ''Locally owned banks are totally dependent on the local market for success. They must have the [customer's] best interest at heart. Compare that to banks where a [ local] branch is just a cog in a corporation.''

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