A branch of New York's Citibank setting up in Rockville? Pittsburgh's Mellon Bank opening in Washington? Bethesda's Suburban Bank moving into Fairfax County? Bank of Boston expanding into Chevy Chase and Vienna?
These attacks on the traditional ban on interstate banking have been launched since Comptroller of the Currency C. T. Conover allowed a ban on so-called consumer banks to expire on March 31.
They are part of a flood of applications filed recently, mainly by large urban banks seeking to expand around the country.
Bank of Boston announced Friday that it has applied with the Comptroller of the Currency to establish limited-purpose banks in Maryland, Virginia and other Atlantic Coast and Southeastern states.
Mellon has requested permission to set up 15 offices, including one here; Citicorp's Rockville target is one of 10 it has announced, and First Interstate Bancorp of Los Angeles has 12 applications pending.
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In addition, there is a long-standing application from a group called Dimension to establish 31 consumer banks in 25 states, including the Washington area.
The banks are seeking to establish what are known as consumer banks, also called a non-bank bank or a loophole bank. Consumer banks usually perform all the functions of any other bank except making commercial loans. Under federal law, a bank is a financial institution that both accepts checking accounts and makes commercial loans.
An institution that does not do both is not a bank in the eyes of the law. Therefore, restrictions against setting up branches across state lines that prevent banks and their holding companies from expanding geographically do not apply to consumer banks.
Big banks that want to expand nationwide have found this to be the most convenient loophole in the law to do so.
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More than 60 consumer banks have been established in the past three years, most of them by securities firms.
However, the newest tide involves big banks. More than 15 banks are waiting to try to slip through the loophole, including Bank of New York, Security Pacific in Los Angeles, Chase Manhattan, Chemical Bank, and the First National Bank of Boston.
Although consumer banks slip through the federal proscription against interstate branching, they still are regulated as banks by the Comptroller of the Currency.
Citicorp, by far the most aggressive big bank seeking consumer deposits, already has expanded its reach without setting up one consumer bank. Citicorp, which owns Citibank, bought failing savings and loan associations in California, Illinois and Florida.
It also taps consumer pocketbooks with a vast credit card operation. Not only does Citibank run the standard bank credit cards--it issues millions of Visa and MasterCard charge cards across the country--it also owns two major travel and entertainment charge cards, Diners Club and Carte Blanche. It set up a regional credit card operation in the Baltimore-Washington area called Choice and bought out Riggs National Bank's failing Central Charge operation in late 1982.
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Citicorp also has been aggressive in attacking both legal and regulatory barriers to nationwide banking and has spent hundreds of millions of dollars to develop electronic systems that can service a customer in Idaho as easily as a standard Citibank customer in New York City.
In many respects, Citicorp has established a nationwide bank. It has some form of banking relationship--loan, deposit or credit card--with 11.7 million of the nation's 85 million households. It has consumer customers in every state.
And, so far, it has done so without setting up one "consumer bank." Where states like Maine grant it the right to set up a bank--in return for New York state giving Maine banks the right to establish New York operations--it will do so.
Bank of Boston spokesman Wayne Taylor said the bank was trying to position itself to take advantage of recent federal decisions that appear to lift some of the long-standing prohibitions against nationwide banking. "Those regulations are starting to crumble. The trend is toward national banking," he said.
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"Our existing presence in these markets, particularly in the areas of residential mortgage and trust services, makes it only natural for us to be seeking these charters," bank Chairman William L. Brown said.
Bank of Boston currently operates trust subsidiaries in Sarasota and Deerfield Beach, Fla., and Hilton Head, S.C., and is deeply involved in the mortgage banking market in the Southeast.
Bank of Boston Corp., an international multibank holding company, has assets of $20 billion.
Local bankers are divided over the possible arrival of money center banks. The Maryland legislature successfully stopped Citibank's attempt to allow it to establish full branches in that state in exchange for reciprocity for Maryland banks--allowing them to branch into New York.
The D.C. Bankers Association says it would like to put off any invasion until sanctioned by Congress. Generally, small bankers fear the competition. Big Washington banks do, too, but they cannot plead to keep out-of-state banks away because they want to plant their own roots in other states. None of the District banks, however, has yet made application to set up a non-bank bank elsewhere.
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The chairmen of the House and Senate banking committees and a number of congressmen have petitioned Conover to extend his ban on consumer banks until Congress can act. Conover previously stated it was not necessary. He met again recently with Sen. Jake Garn (R-Utah) and Rep. Fernand J. St Germain (D-R.I.), who control banking bills, but Conover aides say they do not know which way he is leaning.
Meanwhile, the Federal Reserve, which started the flood by permitting U.S. Trust Co. of New York to turn its Florida office into a non-bank bank, is sitting safely on the dike. The Fed, which has to approve expansion by bank holding companies, has let it be known that it will defer its decision on all cases until Conover acts.
