An Indian tribe's controversial efforts to acquire a San Diego bank took another step forward last week.

Frank V. Riolo, president and chief executive of Borrego Springs Bank, said regulators at the San Francisco office of the Office of the Comptroller of the Currency said they would recommend approval of the bank's application for a federal charter.

Mr. Riolo said regional OCC officials said they would "be sending it up the pike" after the public comment period, which ends Wednesday.

Approval of the federal charter would clear the way for the bank to sell a majority ownership to the Viejas Band of the Kumeyaay Indians in exchange for a needed capital injection, Mr. Riolo said.

A federal charter would circumvent state banking officials, who Mr. Riolo says have dragged their feet in approving the sale.

The Comptroller's Office seems "very sympathetic to what we're trying to do and interested in it," Mr. Riolo said. "They've been very cooperative."

State Banking Superintendent Conrad Hewitt could not be reached for comment.

Mr. Riolo said the approval would be conditional on the tribe's waiving its sovereign immunity, and thus subjecting itself to the authority of U.S. and state banking laws where applicable. Under U.S. law and treaty, the tribe is a sovereign state.

The banker said the tribe would readily agree to that, having already done so to obtain approval from the Federal Deposit Insurance Corp. several months ago.

The state-chartered bank has been battling state regulators for more than a year over the tribe's planned acquisition. The tribe agreed in August 1995 to inject $2.4 million into the struggling bank in exchange for a 60% ownership.

The California Banking Department has said it's concerned that the funds would come from gambling proceeds, and that the three tribe members proposed for the bank's board lack banking experience.

But Mr. Riolo said he and the tribe are convinced that the Banking Department is succumbing to pressure from state Attorney General Dan Lungren, who has said he's uncomfortable with ownership of banks by "gambling interests."

The Viejas own a casino that includes video gambling machines, which Mr. Lungren says are illegal under state law. The Indians have maintained that they're a sovereign nation under U.S. law, and the matter is currently pending in court.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.