The virtual bank isn't what you think of as the ideal Internet start-up. There are capital requirements, rules for how you must serve your customers, and federal regulators looking over your shoulder every minute.

Not exactly a seat-of-the-pants Internet start-up scenario.

Maybe for this reason, there has not been an explosion in the number of banks that don't have "real" branches or the usual trappings of heavy formal furniture and long draperies. What the online banks offer customers, often at attractive interest rates, is an electronic relationship that allows people to hop on the Internet and point and click to open accounts, get account balances, transfer funds, pay bills, apply for loans, and other banking services.

Unlike electronic brokerages, which have quickly proliferated, Internet-only banks have appeared in a measured way over the last four years. Currently, federal regulators are overseeing fewer than a dozen of them, though there are hundreds of "real" banks with Web sites where certain transactions can be performed electronically.

"The interest in banks that offer online banking is a lot less than people ever imagined," said Richard M. Riccobono, deputy director of the Office of Thrift Supervision. "People thought it would explode."

Since the first "pure" Internet bank went online in May 1995, OTS has approved five charters, and there are three more in the pipeline. Add to those an additional three approved by the Office of the Comptroller of the Currency and one supervised by the Federal Deposit Insurance Corporation. Most of these already have FDIC insurance and the others are still waiting for it, a requisite to opening up shop.

Regulators and analysts expect that the real growth in Internet banking will come from Internet divisions created by traditional banks. These operate as units of their parent banks under different trade names. There are Wingspanbank, which is owned by BankOne; USAccess Bank, owned by Central Bank USA; and BankDirect, whose parent is Texas Capital Bank.

"There are a lot of offshoots," said Chris Musto, director of financial services for Gomez Advisors Inc., an electronic commerce research firm. Musto said that instead of applying for a charter, which can be a lengthy process, some managements have found it simpler to buy a bank, or use an existing charter to incubate an Internet banking operation. For example, in the last four months, Bank One, American Express and Citibank opened Internet-only operations.

All of these pose new questions for regulators, who have to apply the same standards of safety and soundness to virtual banks as they would to any bricks-and-mortar lending institution.

At the OTS, regulators have been grappling with how to keep track of virtual banks, whose managements often combine fast-thinking techies, bankers who are more willing to take on risk than their off-line brethren, and investors. The agency now requires institutions to notify it 30 days before a Web site goes up.

There are concerns about security and privacy, and about whether start-up banks are in it for the long term. OTS requires Internet banks to pass "hacker" tests in which outside experts try to break in to test security measures.

"My fear is that if someone does break in, you don't have people lining up around the block," said the OTS's Riccobono. "This is drag-and-click and you're out. A run on an electronic bank would be tougher to handle."

He said regulators are worried about how assets will be invested, about the volatility of deposits, and whether bank managements are planning to sell their charters. "It creates more concern because it absolutely is the unknown," he said.

Cynthia Bonnette, an examination specialist for the FDIC, said traditional banking risks--such as loans--take on a different shape on the Internet because territories are not defined and instant credit decisions are possible.

Each of the regulators has issued guidance on Internet banking operations. The OCC recently produced a lengthy handbook that includes the types of attacks that online banks need to anticipate, such as hackers guessing passwords or monitoring keystrokes to break into a bank's operating system.

Most estimates are that 6 million consumers use Internet banking and that that number will grow to 24 million by 2002. Gomez Advisors is more conservative about the number of current users--5 million, it says. Gomez's estimate counts only online customers who have used the sites within the past 30 days.

Banking regulators expect that competition and low costs will drive cyberbanking. It costs a bank about a penny to execute a transaction online, compared with a dollar for a manual transaction in a branch bank.

If Europe is any example, the regulators may have a lot of surfing ahead of them.

Despite doubters, Egg, an Internet bank set up a year ago by London's Prudential Assurance Co., now has $13 billion in deposits, attracting a clientele that is young, computer savvy and willing to click for the best rates--wherever in cyberspace they might be.

OUT FOR COMMENT: Let's just say the Occupational Safety and Health Administration didn't miss a thing in this inspection. Regulators slapped a New Jersy manufacturing firm with $530,000 in fines for a variety of infractions, among them severe accumulations of pigeon droppings.