The District would lose its status as the only jurisdiction in the nation that requires legislative approval for local bank charters under a bill pending before the D.C. Council.
Financial industry executives who testified yesterday before the D.C. Council said they would like the requirement eliminated.
“It would be a better process without that step,” said Michael Fitzgerald, Bank of Georgetown president.
Eliminating the legislative approval would bring in more tax revenue and boost local employment, according to witnesses at the hearing.
All of the states leave chartering of new local banks to state regulators.
The District is at “a clear disadvantage relative to Maryland and Virginia,” said Julio Lopez Brito, chairman of NuAmerica Bank, whose charter from the District was granted this spring.
The other banks chartered by the District are WashingtonFirst Bank and the Bank of Georgetown.
Washington has the fewest chartered banks of any jurisdiction in the United States, according to the Federal Reserve Board, which regulates financial institutions. Alaska has the second fewest with four banks. Illinois has the most with 486 state-chartered banks.
Local and federal regulators require charters before banks can make loans or accept deposits.
Charters from the District are required only for local banks. National banks, like Bank of America or Commerce Bank, operate branches in the District under federal charters.
In the District, banks must get approval from the Department of Insurance, Securities and Banking, then seek approval from the D.C. Council.
The added expense and uncertainty of the council’s approval make banks and their shareholders reluctant to seek a charter in the District, bankers who testified at the D.C. Council hearing said.
The District’s two-part regulatory review process can take eight months or more, said Thomas E. Hampton, D.C.’s Department of Insurance, Securities and Banking commissioner. He called the D.C. Council approval “duplicative.”
The legislative proposal to eliminate D.C. Council approval in bank chartering was introduced by Mary M. Cheh, a Ward 3 Democrat and chairman of the Public Services and Consumer Affairs Committtee.
So far, no council members have spoken against the bill. The council is likely to vote on the legislation in September, Mrs. Cheh said.
She said more local banks would provide more tax revenue for the District at a time when declines in the real estate industry are hurting the local economy.
In addition, much of the property in the District is owned by the federal government or foreign governments with embassies here, which absolves them from local taxation.
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