1/24/97 -- 7:54 PM

Banking's Future,0630

ST. LOUIS (AP) - The big question in banking in the coming century may not be ``Where do you bank?'' but ``Where is the bank?'' Federal Reserve Bank officials say.

Jerry L. Jordan, president of the Federal Reserve Bank of Cleveland, said the blitz of electronic banking services, the advent of the ``smart card'' that could replace money, and other innovations are changing the very foundations of banking in this country.

``The word `bank' could become a verb, rather than a noun,'' said Jordan, one of four Federal Reserve Bank presidents to participate Friday in a conference on ``Money and Central Banking in the 21st Century'' at the University of Missouri-St. Louis.

``My guess is that when I ask my granddaughters where their bank is, the address will end with dot-com,'' Jordan said. ``When I ask where they keep their money, they will say `Why, on my hard drive. Where do you keep yours?'''

Jordan suggested that nonbanking businesses - from the Postal Service to Internet providers such as America Online and Compuserve - could take on some of the functions of banks.

The challenge, said Thomas M. Hoenig, president of the Federal Reserve Bank of Kansas City, will be to supervise the evolving institutions. As brokerages and insurance companies move further into banking functions like retirement savings plans and checking-type accounts, banks are getting deeper into the securities and insurance fields.

The Depression-era walls created by regulators to separate banking from commerce are crumbling, Hoenig said, and the evolving technology is making it impossible to rebuild them.

``It's not something you want to turn the clock back on,'' said Hoenig. ``You have to change with it.''

``And we're not there yet,'' Jordan told a news conference after the seminar. ``We're not prepared to say we are competent to do it right now, but we're working very hard at it.''

Thomas C. Melzer, president of the Federal Reserve Bank of St. Louis, said that while the country's payments system may change from paper checks to chips on cards or strokes on a computer keyboard, the Fed's main role in setting monetary policy will remain.

The Fed seeks to encourage noninflationary economic growth by attempting to control the availability of credit and the supply of money.

``I don't believe the fundamental role of the Federal Reserve in setting the quantity, and by implication the value, of the monetary standard will change during the next century,'' Melzer said. He noted, however, that automation and technical innovation will continue to affect the payments system.

The very structure of the Federal Reserve System, with 12 regional banks and a board in Washington appointed by the president, helps keep it viable, said Michael H. Moskow, president of the Federal Reserve Bank of Chicago.

``Our regional system facilitates the development of effective, long-term policy,'' said Moskow. ``It provides insulation from day-to-day political pressures ... and encourages a flow of ideas and input from ``beyond the beltway.''

``It's a system that's worked well for many years, and, I predict, will continue to do so in the 21st Century.''

The four bank presidents got a warm welcome from students and faculty at the university, but were a disappointment to a dozen or so national financial writers.

Those reporters, many of whom had flown to St. Louis just for the colloquium, were frustrated in their attempts to get the officials to speculate on whether the Fed planned to raise interest rates in the near future.

Copyright 1997 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.