WASHINGTON (AP) _ Congress should give regional banking a chance to work before considering plans to allow unrestricted interstate banking, the chairman of Bank of New England Corp. testified Wednesday.

''There is nothing to be gained, and much that could be lost, in considering interstate banking legislation without the benefits of the coming regional experience,'' Walter J. Connolly Jr. told the Senate Banking Committee.

The Supreme Court ruled last week that states have the right to set up regional banking systems, allowing banks from neighboring states to do business within their boundaries, while restricting other banks' access.

The case upheld laws in Massachusetts and Connecticut that allowed regional mergers while prohibiting the entry of banks from outside the six New England states, including the big New York banks.

On Friday, Bank of New England Corp., based in Massachusetts, merged with CBT Corp., the parent of the Connecticut Bank and Trust Co., to become the first regional bank under the New England experiment.

''The merger of Bank of New England Corp. and CBT creates a strong regional banking team with assets on the order of $14 billion,'' Connolly said. ''That may sound impressive until you consider that is only a small fraction of the resources of any one of our nation's largest banks.''

For example, New York's Citicorp, biggest bank holding company in the world, has assets of more than $150 billion.

Connolly said unrestricted interstate banking could result in a concentration of banking assets in small geographic areas, a dramatic change in the way banking has worked in the United States.

''Geographic restrictions have been largely responsible for the local orientation of the American banking system,'' he said.

Connolly said that local orientation allows decisions, such as whether to grant a loan, to be ''made on the basis of personal knowledge and not merely on a review of financial statements at bank headquarters in distant cities.''

Testifying before the Banking Committee last week, Treasury Secretary James Baker endorsed a move toward full interstate banking, a move that would take a new federal law to authorize it.

Connolly said that move may be a good idea in time.

But, he said, ''let's remember that the experiment, delayed by a two-year legal struggle, has just begun. In New England, in fact, the experiment began only two days ago. I suggest that we wait for the results.''