Merrill Lynch's "bull," American Express and Sears, Roebuck & Co. were pinpointed today as among the chief services competition for business that traditionally has gone to commercial banks.

In an address to the D.C. Bankers Association, Riggs National Bank President Daniel Callahan III also said the metropolitan Washington area "may well be at the cutting edge of change" as government regulators grapple with the need to alter their own rules to cope with new business and technological developments that have encouraged nonbanking corporations to complete for money services.

"As rose by any other name may smell as sweet, but a bank when it is called a 'brokerage house' or a 'department store' is subject to substantially less regulation; such institutions will present bankers with new challenges to maintain market share and perhaps even to maintain their own legal identities," the Riggs executive warned.

Callahan, who is president of the D.C. Bankers, did not call for any restrictions on such new interindustry competition as investment from Merrill Lynch's cash management accounts combined with Visa cards or plans of No. 1 retailer Sears to sell short-term investment instruments to customers through its nationwide stores.

But he emphasized his view that there must be some equalization of government regulatory requirements for all enterprises engaged in the same businesses.

Callahan said the District of Columbia "best exemplifies the growing inconsistency between past regulatory schemes and current financial reality . . . . the extent to which artificial barriers inhibit the delivery of financial products, inconvenience the customers and place commercial banks at a competitive disadvantage."

For more than a decade, as Maryland and Virginia banks have taken a growing percentage of consumer and business banking volume in the D.C. area, city bankers have been pushing for changes in federal law that would permit them to branch across state lines.

"Failure by the Congress or by the regulators to throw off the past and to acknowledge the present, or failure by our own managment to fathom and to invest in the future will expose financial institutions in the 1980s to the same distress as that suffered today in some other industries," Callahan cautioned.

A key challenge to bankers is to focus on specific markets that can serve best, he said, adding: "Not every bank will aspire to participate in national markets. . . . Products and target markets must be carefully defined to assure that the products are profitable and can be delivered more efficiently by the bank than by its competition."

And Callahan said D.C. bankers have a special responsiblity to lead by articulating options and advising the government on how legislative change can be structured to avoid the undue concentrations of economic power that many members of Congress and smaller bankers fear from an end to restrictions on interstate banking.