THE WONDERS OF lively competition: Ask any banker these days if the District of Columbia is a good market -- or if the average local bank customer here is worth competing for -- and the answer is a vigorous yes. So fierce is the battle for position in this market that offers of big money for local development and for thousands of jobs are materializing everywhere. What's wrong with all these pledges of investment capital, development expertise and friendly rates for individual customers? Nothing -- which is why Mayor Barry should veto a limited banking bill passed by the D.C. Council and press instead for a full interstate banking bill that would reap the best benefits of all.

The council bill would limit competition, allowing only banks in the District and 11 southeastern states to merge with and acquire each other. This systematically excludes the country's largest money-center banks from competing for customers or otherwise demonstrating their financial commitments to the city -- including to people who have not up to now been able to get any financing to start or expand a business. Why not open it up all the way?

D.C. bankers argue that they pay higher rates of interest on money-market accounts than New York banks, that they charge lower fees on checking accounts and other consumer services and that they charge lower interest rates on consumer loans and credit cards. If all this is true, the local bankers should be able to compete perfectly well.

But the local bankers contend that New York banks will eliminate all sorts of banking services of any local bank they might acquire and that the attractive offers of the "outsiders are only temporary until these institutions can get an unfair piece of the local action here. Couldn't the same be said of local bankers once theyhave kept out any money-center competition?

Mayor Barry has a better idea worth trying: open the market in two years -- or sooner in certain instances that would benefit the city measurably. Under his proposal, any bank could get a banking license in the District after two years. Under a "special entry" provision, any bank could get a license earlier if it met criteria that include an investment of more than $100 million in the District within two years and the hiring of at least 200 District residents. Those banks granted special entry would be required to restrict their activities to the areas that a banking superintendent designated as having inadequate banking services. Translation: Citicorp and any other money centers would be confined for two years to serving economically depressed areas such as those in Wards 6, 7 and 8.

Why not shop for the best deal possible for those in this city who haven't had much of chance at any deal? And why not give early entry to those institutions that put their money where their banking interests are? Mayor Barry should stand up for this idea by vetoing the council bill and working with all parties to enact a measure that could make a constructive difference in all parts of this city.