Maryland Opens Door to Citicorp and Other Out-of-State Banks

Article excerpt

NEW YORK -- While several states are grappling with whether to adopt regional or nationwide interstate banking legislative proposals, Maryland's legislature this week approved two measures that move the state in both directions.

One measure allows out-of-state banking companies from anywhere in the nation to apply to establish limited-service banks in Maryland and then convert them later into full-serice commercial banks.

The other bill allows banks from Virginia, the District of Columbia, Delaware, and West Virginia to acquire Maryland banks on condition that those states offer reciprocal treatment to Maryland banks.

Maryland Gov. Harry Hughes has endorsed both measures and is expected to sign them next month.

"The Maryland legislation represents an unusual and innovative way to bring banks from outside the region into Maryland," said Richard Stillinger, who follows southeastern banks for Keefe, Bruyette & Woods Inc., a New York investment banking firm.

However, Mr. Stillinger added that he did not expect this kind of law to spread like wildfire to other states, particularly given the resistance to New York banks in several states.

Three large New York banks have announced their intention of taking advantage of the new Maryland law. Citicorp has said it will establish a credit card processing center in Hagerstown, while Chase Manhattan Corp. and Chemical New York Corp. have announced plans to start limited-service operations somewhere in Maryland.

Other banks that are believed to be considering establishing Maryland limited-service banks are BankAmerica Corp. and Manufacturers Hanover Corp.

Under the legislation, out-of-state banks that establish a limited-service bank in Maryland before July 1, 1986, can later apply for a full-service operation, but no full-service charters will be approved before July 1, 1986.

Conditions on these institutions include the following:

* The limited-service banks cannot compete with Maryland banks.

* An out-of-state bank cannot apply for full-service operations unless the limited-service bank has operated for six months.

* The out-of-state banks must agree to invest at least $25 million on plants and facilities and hire 1,000 individuals, mostly in areas of high unemployment, over a three-year period.

* No more than 10 branches, can be established in the first year, with an unlimited number in subsequent years.

* The out-of-state banks cannot acquire Maryland banks.

The legislative proposal was part of a deal between Gov. Hughes and citicorp, and was originally intended to benefit only Citicorp. …