A D.C. Council member plans to introduce legislation next week to overhaul a law that requires the council’s approval before a bank can secure a charter to operate in the city.
Unlike any of the 50 states, the District requires legislative approval for a bank charter.
A bill D.C. Council member Mary Cheh plans to introduce Tuesday would leave the decision on who gets a charter to the District’s Department of Insurance, Securities and Banking. It would eliminate hearings and the need for D.C. Council approval.
Only two banks — WashingtonFirst Bank and the Bank of Georgetown — currently have Washington charters, a fact Mrs. Cheh and bankers blame on the added costs and uncertainties of the District’s procedures for legislative approval. Charters are required by local and federal regulators before a bank can make loans or accept deposits.
“By getting rid of this antiquated requirement, we are making the District conform to modern banking laws, and we are removing an unnecessary hurdle to banks seeking District charters,” said Mrs. Cheh, a Ward 3 Democrat who chairs the Committee on Public Services and Consumer Affairs.
Currently, banks must apply to the Department of Insurance, Securities and Banking through what Mrs. Cheh calls a “lengthy and in-depth application process.” Afterward, the department’s commissioner can recommend to the D.C. Council whether to approve the charter.
The council must approve or reject the recommendation within 45 days, otherwise the approval is automatic.
A third bank, NuAmerica Bank, is scheduled to get a charter in early May.
Julio Lopez Brito, chairman of the proposed NuAmerica Bank, said an easier chartering process would open opportunities for banks to serve the District’s Hispanic community, which so far has been “underbanked or underserved.”
The Department of Insurance, Securities and Banking recommended a charter for NuAmerica Bank days before a March 21 D.C. Council hearing on the bank’s application. So far, no member of the D.C. Council is opposing it.
“Unofficially, it’s approved,” Mr. Brito said.
The bank plans to specialize in small-business loans for Hispanics.
“The minority and Hispanic-owned businesses are growing at twice the rate of general businesses,” Mr. Brito said. “In this area, it’s even larger.”
Shaza Andersen, chief operating officer of WashingtonFirst, said eliminating the legislative approval requirement would not revolutionize the banking industry, but it would make the District more competitive.
“It would just put D.C. on the same level playing field as the other states,” she said.
A federal reform in 2004 that was supposed to make it easier for banks to get charters in Washington failed to make much headway. The number of chartered banks in the District went from zero to two, when WashingtonFirst opened in 2004 and Bank of Georgetown opened in 2005.
The change involved switching federal authority over the District’s banks from the U.S. Comptroller of the Currency to the Federal Deposit Insurance Corp., which uses less burdensome regulations to review banks’ charter applications.
However, a significant increase in the number of Washington banks “never occurred,” Mrs. Cheh said.
“One of the reasons was this additional step of banks having to seek council approval.”
Thomas Hampton, Department of Insurance, Securities and Banking commissioner, said his agency already conducts a hearing to review a bank’s application for a charter.
“It’s just a duplicative process done by the council,” said Mr. Hampton, who supports eliminating the legislative approval requirement.
He said he knows of no one on the council who opposes the proposal.
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