Citicorp, which has played a major role in expanding banks' powers and geographic reach, has devised yet another way to skirt a half-century-old prohibition against commercial banks underwriting securities.

If approved by the Federal Reserve Board, the Citicorp strategy could start a new round of competition in the securities industry.

Citicorp filed a request Dec. 7 with the Federal Reserve Bank of New York to permit its 2 1/2-year-old subsidiary, Citicorp Securities Inc., to underwrite corporate bonds, commercial paper, mortgage-backed securities and municipal revenue bonds.

It based the application on a provision in the 1933 Glass-Steagall Act that allows a bank holding company to underwrite those securities, provided the bank does so through a separate subsidiary and provided that underwriting of those securities is not the subsidiary's principal business.

No other bank has ever tried to take advantage of the provision, which could become the third major loophole in federal banking regulations to be utilized by Citicorp.

The big bank found a way to get into the insurance business by utilizing a South Dakota state law, and expanded its operations to five states by establishing non-bank banks despite restrictions on interstate banking. Previously, by using a law meant to save troubled savings and loan associations, Citicorp managed to get a toehold in California.

The money-center leader has asked the Fed to permit Citicorp Services to do up to 20 percent of its business in corporate bonds, commercial paper, mortgage-related securities and municipal revenue bonds. The subsidiary's main business would continue to be U.S government obligations and money market instruments -- a business opened to banks by Glass-Steagall.

After the New York Fed passes on the proposal, it will go to the Federal Reserve Board for a decision. Such a controversial issue is liable to be studied for quite a while.

During the last session of Congress, the Reagan administration tried unsuccessfully to promote a bill granting bank holding companies new powers through subsidiaries. The Citicorp application differs from that proposal in two major ways. It goes beyond what the administration would have permitted to include corporate bond underwriting, but because of the limits of the Glass-Steagall Act, would not permit the subsidiary to make those underwriting activities its principal business.

Asked if the application were a response to Congress' inability to act -- just as the non-bank bank and South Dakota loopholes were -- a Citicorp attorney said no. He denied that the bank was trying to exploit another legal loophole, insisting that the provision had been known for years. He conceded this was the first time it had been applied for this purpose.

In 1983, the Fed approved the acquisition of Charles Schwab & Co., a discount broker, by BankAmerica. The securities industry brought suit, but BankAmerica won in the Supreme Court last January by citing the provision discovered by Citibank -- that underwriting would not be the principal business of the subsidiary.

In a related case involving Bankers Trust of New York, the high court ruled last summer that the commercial paper was a security but did not say whether Bankers Trust's operations constituted underwriting. This decision threw the bank's effort to sell commercial paper back to the Federal Reserve.