Federal Reserve Chairman Alan Greenspan urged Congress yesterday to revamp the nation's banking system, which he said was "frozen within a regulatory structure fashioned some 50 years ago."

"It is essential that Congress come to grips with the difficult decisions that must be made to update our laws to the new circumstances of technology and competition," Greenspan said in his first testimony to a congressional committee since becoming head of the central bank two months ago.

Banks have been pressuring Congress to allow them to expand into other enterprises, such as the underwriting of securities.

But securities firms have so far blocked all efforts to eliminate the barriers between the banking and securities industries that were established in 1933.

Greenspan told a House Energy and Commerce subcommittee the securities industry had grown rapidly in recent years, offering new products and new competition in areas once reserved for banks. "All of these developments have amounted to a very much more competitive environment for banking, while at the same time banking has been frozen within a regulatory structure fashioned some 50 years ago," he said. Banks have been trying to circumvent the congressional impasse by using loopholes in existing laws to expand into other enterprises.

Congress closed the loopholes in August, barring federal regulators from allowing banks expanded powers until next March 1. Lawmakers hope to have forged a legislative compromise on the issue by that time.

Greenspan approved of this approach in his testimony, saying it would give Congress time to "review our banking and financial laws and to make decisions on the need for financial restructuring legislation before the moratorium expires."

Calling himself a "strong deregulator," Greenspan signaled his willingness to support greater banking deregulation than was sanctioned by his predecessor, Paul A. Volcker, who often cautioned Congress on the need to ensure stability in the banking system.

Greenspan, however, stopped short of spelling out just what type of legislation he would favor.

He said the other members of the Federal Reserve Board were still studying the issue and they had not reached consensus. He promised to present a report to Congress within several weeks on specific ways that traditional bank practices should be expanded.

"We hope that these recommendations ... will enable the American financial system to remain competitive, serving the needs of customers here and abroad without compromising the strength or stability of our financial markets," Greenspan told the telecommunications and finance subcommittee chaired by Rep. Edward Markey (D-Mass.).

Some members of the panel expressed disappointment that Greenspan was not more specific on changes he felt should be made.

The panel also heard from David S. Ruder, chairman of the Securities and Exchange Commission, who said his agency supported a bill introduced by Markey that would require banks engaged in securities underwriting to do so through separate affiliates under SEC regulation.

Ruder said the SEC should be involved in such regulation by banks because of its duty to ensure "fair and orderly securities markets."