Connecticut officials have drawn up a new state charter with lower capital requirements to encourage more start-ups. However, the new charter comes with plenty of restrictions on lending and investing.

"Several years ago, Meriden, Conn., had 10 independent banks, and now it has none," according to John P. Burke, the state banking commissioner.

The new community bank charter would increase the availability of banking services to small businesses and other customers who are not being served by larger banks, he said.

The proposed charter requires $3 million of start-up capital, compared to the current $5 million. The new community banks would be allowed to do consumer and home mortgage lending. Commercial loans would be limited to $300,000, or 10% of the bank's capital. Commercial real estate lending would be allowed as well but could not constitute more than 10% of all loans.

In addition, the banks could not sell their own mutual funds, invest in derivative securities other than mortgage-backeds fully guaranteed by governmental agencies, or own any real property for use in the business of the bank.

Mr. Burke said this last requirement would prevent banks from buying "big palaces."

The aggregate amount of all loans made by a community bank could not exceed 80% of its total deposits.

Mr. Burke admitted the charter would not have wide appeal. "I don't expect to be inundated with requests for bank charters, maybe six to eight requests," he said.

The Connecticut General Assembly has just convened, and hearings are planned by the banking committees. Mr. Burke said he expects the charter to win lawmakers' approval. - Vicki Needham, Medill News Service

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