Financial Services Sector Revamps Drive to Consolidate and Restructure Affects Banking, Insurance, and Securities Industries. URGE TO MERGE

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FAR-REACHING restructuring - including mergers, acquisitions, and tighter federal supervision - can be expected within the United States financial services industry during the next few years, experts agree.

The prospective merger of Chemical Bank and Manufacturers Hanover Corporation, currently the sixth and ninth largest commercial banks in the US, is only one indication of the turmoil and change occurring in the financial-services sector.

Assuming the merger announced Monday is approved by stockholders and bank regulators later this year, the new bank, which will retain the Chemical name, will have assets of $135 billion, second only to Citicorp, also based in New York.

But the merger of Chemical Bank and Manufacturers Hanover will most likely be only the first in a round of similar mergers, as banking institutions seek to slash expenses through job layoffs, and the consolidation of credit-card and other operational functions.

The commercial banking industry has been hard-hit in recent years by losses linked to bad loans in third-world nations and the domestic real estate market. Several banks in the Northeast were forced into bankruptcy or takeover last year. A number of banks have sold credit-card operations or closed down specialized offices. Layoffs have become commonplace.

Beyond Chemical Bank and Manny Hanny, two other regional banking giants are also holding merger talks - NCNB, in North Carolina, and C&S/Sovran, which is itself the product of a merger of banks in Virginia and Georgia. If consummated, the combined NCNB and C&S/Sovran linkup would become the third-largest US bank, behind Chemical Bank, but larger than the San Francisco-based Bank of America.

Other regional banks are expected to consolidate to remain competitive.

The mergers highlight pressures on Washington to enact comprehensive bank reform legislation this year. The Senate, House, and White House are pushing their own significantly different proposals.

Meanwhile, the underlying drive for reorganization is also visible in two other key financial sectors, Wall Street brokerage houses and insurance companies.

A number of brokerage houses have turned in less than stellar performances in recent years, as the industry was forced to slash expenses following the stock market crash of October 1987. …