American Security Bank's management has approved a major expansion of its operations and computer center at Mount Vernon Square in downtown Washington- a decision Mayor Walter E. Washington said yesterday "comes at a critical time when we are trying to get new development east of 16th Street."

According to officers of the city's second-largest bank who plan to announce the long-debated step today, more than 300 employees will be moved to the expanded facilities when construction is completed.

The bank's current operations headquarters, a seven-story structure at 7th and Massachusetts Avenue NW, was the first major building constructed in the Mount Vernon area after the riots of 1968.

According to Mayor Washington, the bank now employs nearly 400 persons at the complex, which also includes a branch of the bank.

The project being designed by architect Vlastimil Koubek will cost more than $5 million and will double the size of the structure, by extending it along Massachusetts Avenue. The new center will house not only American Security's operations center and consumer credit department but also an employee cafeteria and two floors of parking.

Overall, the building will have 252,000 square feet when extension is completed. Construction will start late this year or early in 1978 and take a year, a bank spokesman said.

In an interview yesterday, Mayor Washington said the bank's decision should be "a stabilizing factor" in helping to maintain employment in "a depressed area." He said he hopes the bank will develop training programs together with new City University, which is planing to locate a campus nearby.

American Security's officers have made no secret of their desire to grow into a regional banking firm, one not restricted by D.C. borders. A loan office has been opened in Richmond and bank executives studied the Washington suburbs as a possible location for an expanded computer center.

"If they had not been able to expand here we would have lost those jobs to te suburbs," the Mayor commented.

Said bank chairman Carleton M. Stewart: "Faced with growing space requirements we naturally weighed the factors that have led many Washington businesses to move their operations to the suburbs. However . . . we have a strong interest in (the city's) revival . . . We hope this will encourage others to support this vital vore area of our central city."

Although a proposal to build a convention center in the Mount Vernon Square area has reached an impasse in a House-Senate conference, Mayor Washington said he remains confident such a complex will be constructed at the planned site.

"I'm pleased with the whole pattern that is developing," he said referring to other recent announcements of projects for depressed areas of the city.

New housing is being built in virtually all major sections of the city, an office building boom continues along K Street NW and near Georgetown, the old O Street Market is to be reopened with a new Giant Food Supermarket, and a downtown complets around the site of the National Press Building is being planned.

Earlier this week, a delegation on 14th Street NW residents traveled to the District Building to voices their approval of steps to rebuild sections of that depressed riot corridor Mayor noted.