The D.C. City Council should oppose a dozen requests to form new banks in the District and should pass legislation to ban limited-service banks, or so-called nonbank banks, D.C. Council member Charlene Drew Jarvis (D-Ward 4) said yesterday.

Jarvis, chairwoman of the committee that oversees bank licensing, asked the City Council to recommend against 11 companies seeking 12 new banking charters from the U.S. Comptroller of the Currency.

Jarvis, decrying the applicants as "boutique" bankers who would bring unfair competition to local banks and cater only to rich clientele, also submitted proposed legislation that would ban limited service banks of the type most of the 11 companies want to establish here.

The council will vote on Jarvis' recommendations and proposed legislation at its next meeting on Tuesday. The comptroller is not bound by the council's recommendation, although he must consider local sentiment when weighing requests for bank charters.

If the comptroller rejects the applications, the companies would have to reapply to D.C. officials, whose community investment requirements are stricter than the comptroller's.

Local bankers argue that if the City Council passes a law barring limited service banks, eight of the 11 applicants will be prevented from entering the District, even if they get charters from the comptroller.

Other lawyers, including those for the 11 applicants, disagree. They say local law enacted after the bank applications were submitted would not override federal power.

A limited-service bank offers checking accounts or commercial loans, but not both. Limited-service banks get around regulation by the Federal Reserve Board, which generally applies stricter regulations on interstate banking.

The fight surrounding the 11 companies began earlier this year, with the applicants submitting requests for local charters shortly before a D.C. banking law took effect April 11.

Prior to that date, the District was the only place in the country where the federal government, through the comptroller, issued both local and national bank charters. The April law transferred to the D.C. government the power to grant local charters -- the equivalent of a state charter.

The new law also established that any company from outside the states surrounding the District can open in the District only through acquisition of a local bank and by investing $50 million to $100 million in the city, opening two branches in poor areas and creating 200 jobs.

By applying before the new law took effect, the 11 applicants hoped to avoid the stiff investment rules and the uncertainty of dealing with officials who have never before approved bank charters.

The applicants include banking giants Chase Manhattan Corp., J. P. Morgan & Co., Chemical New York Corp. and Bankers Trust New York Corp. and Citicorp, the nation's largest bank holding company. They also include Greyhound Corp., several groups of investors, banks and securities firms, including one that is partly owned by one of Japan's biggest securities traders.

The 11 applicants have argued that the banks they propose opening will not be large enough to justify investments of the magnitude required by D.C. law. They have submitted community investment plans they say are "significantly greater" than those submitted by regional bank holding companies that have been allowed by the council to buy D.C. banks.

"We're pleased that Jarvis recommended against the charters and we hope" the council also "enacts enabling legislation that will ensure the integrity of the interstate banking bill that the council passed in April," said Maurice J. Cullinane, a spokesman for the D.C. Bankers Association.

D.C. bankers say the 11 applicants undermine the new D.C. banking law. The new law boosted the value of existing D.C. banks by permitting outsiders to own banks in the District only by buying local banks, rather than by creating new ones.

Local bankers say Citicorp backed the bill because all but the largest companies will find the law's requirements too high a price to pay to enter the District.