The savings and loan debacle in Maryland and the evolution of interstate banking in the region were undoubtedly the biggest local business stories of 1985. In both instances, however, actions or inaction by local and state governments, more than management decisions in the private sector, changed the course of events in these key segments of the financial-services industry in the region.

Both of those developments qualify as case studies in how not to legislate and regulate the burgeoning financial-services industry.

Further, the schizophrenic interaction between government and business in D.C. and Maryland stands in sharp contrast to the relative ease with which the public and private sectors in Virginia coalesced to ensure the growth of financial institutions, and the economy, in that state.

Virginia quietly passed a regional interstate banking law in 1985, and banks in the state are well on their way to becoming the dominant institutions in the region. Virginia not only enhanced the potential for growth in its economy, but placed its banks in a stronger position to compete with bigger institutions from outside the region.

The governor and state legislators in Virginia supported the state's banking industry with early passage of a regional reciprocal banking bill and resisted outside pressures to undermine the process.

In contrast, Maryland Gov. Harry Hughes, after endorsing regional interstate banking legislation that aides had recommended, succumbed to overtures from money-center banks and altered the interstate banking process in the state. Ditto, D.C. Mayor Marion Barry, whose about-face on the interstate banking issue sparked acrimony, political power plays and a bidding war by banks for the support of District politicians.

With 1985 about to end, politicians in the District and Maryland are wrestling with controversial decisions affecting the financial-services industries in their respective jurisdictions. Virginia, on the other hand, is about to reap the rewards for political astuteness and a prudent rationale for improving the state's economy.

Four Virginia bank companies either have or soon will have access to a larger deposit base and a lucrative new banking market that extends from Northern Virginia to Baltimore. All four -- United Virginia Bankshares Inc., Sovran Financial Corp., Bank of Virginia Co. and Dominion Bankshares -- will have increased their assets substantially by the end of 1986, making them truly strong regional banking institutions, each with assets of $10 billion or more by the end of the next year.

Virginia officials may yet decide to open the state to national interstate banking. most realistic observers of the industry fully expect national interstate banking, in some form, to be adopted by most states. What's more, Congress is expected to approve, ex post facto, whatever the states sanction. In the meantime, however, Virginia this year chose first to create a competitive environment in which there are likely to be minimal disruptions in the state's economy and its banking industry.

Outgoing Virginia Gov. Charles Robb chose to abide by a commitment to support the banking industry in his state and back regional reciprocal banking legislation. In doing so, Robb and state legislators avoided a political Venus flytrap into which their counterparts in D.C. and Maryland fell.

While the banking industries in D.C. and Maryland were undercut by political posturing and one-upsmanship, their counterparts in Virginia were able to establish footholds in the shadows of the District Building and the State House in Annapolis.

In another widely overlooked action, Virginia this year authorized state-chartered S&Ls to merge with associations across state boundaries, long before the Federal Home Loan Bank Board decided to let federally chartered thrifts branch across state lines.

No such provision was included in the interstate banking bill that was passed in Maryland this year. The oversight in Maryland fits the pattern that eventually undermined the state-regulated savings and loan industry last spring.

Insider deals, extremely risky investments, incompetence and mismanagement brought down several of Maryland's state-chartered S&Ls. As the seven-month S&L crisis spills into another year, however, a growing body of evidence supports what many had suspected all along: The integrity of the system was weakened by inadequate regulatory standards and a failure by state officials to enforce existing laws.

In Maryland and the District, a better grasp of regulatory standards and laws affecting the financial services industry should reduce, if not eliminate, the potential for chaos and misunderstanding.

The savings and loan crisis and interstate banking may have been major stories in 1985, but they should be given priority on the 1986 legislative agendas at the District Building and in Annapolis.