Worried about the effects of rampant mergers, Connecticut banking officials are drafting plans for a new community bank charter with lower capital requirements, to encourage more start-ups.

Never before has a state regulator designed a charter specifically for community banks, said Ellen Lamb, vice president of public affairs for the Conference of State Bank Supervisors.

A number of Connecticut communities are losing local banks, said John Burke, the state's banking commissioner. He said the new charter and the start-ups it elicited could help small businesses.

Several months ago, Office of Thrift Supervision officials several months bandied around a similar concept on the federal level - a charter designed to meld the bank and thrift charters and appeal to mutual institutions in particular.

"I imagine other states will take a close look" at Connecticut's plans, Ms. Lamb said. "This is a real innovation."

Bankers said Connecticut's proposed charter, requiring only $3 million in start-up capital versus the current $5 million, could help spur establishment of minority-owned banks.

"It would have a high degree of appeal," said John Carusone, president of Bank Analysis Center, a Hartford investment bank that served as a consultant to state officials. "It's the right thing for inner-city community banks."

Bankers, however, expressed reservations about the proposal, which was first announced at the Connecticut Bankers Association convention.

"It's a nice way for entry into a community that really needs this type of banking," said Barry R. Loucks, president and chief executive of $46 million-asset Simsbury Bank and Trust, which opened 18 months ago. "My concern is that the $3 million may not be enough to support the growth potential for a community bank."

"It's well worth a try," said William McGurk, president and chief executive of Savings Bank of Rockville. It would mean more competition, he said, "but it deserves a fair hearing and a fair shot."

Simsbury took three years to raise its start-up capital, and a group trying to establish a Hartford bank to be called Caribbean First Bank is having trouble coming up with the required $5 million.

"A number of efforts have been made in Connecticut to charter banks, and they've fallen short because of capital problems," Mr. Carusone said. This is "a lot more palatable to would-be organizers."

State officials said they were still working on details of the plan, which they aim to float to bankers and lawmakers. Mr. Burke said he hopes to introduce legislation in November.

The banks would be allowed to do consumer and home mortgage lending in addition to commercial lending, which would be limited to $300,000 for each loan. But they would be barred from any commercial real estate lending, believed to be the downfall of many banks and thrifts during the recession.

Stronger insider lending restrictions might also be imposed.

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