Fleet Bank is opening an office at 1100 New York Ave. in Washington, D.C., that will be dedicated to federal government accounts and contracts.

Government banking has become a much sought-after line of business among big banks, and while one locally based institution has set its sights on the nation’s capital, another bank with a strong Bay State presence is setting up shop on Beacon Hill.

Sovereign Bank announced last week that the commonwealth of Massachusetts has chosen Sovereign to be responsible for the management of all core depository and disbursements for the state.

In May, state Treasurer Timothy Cahill issued a request for proposals for the state’s $30 billion cash management business, the first time it has gone out to bid in more than 10 years.

“Treasurer Cahill just started in January and this is the biggest request for proposals that he initiated,” said Rosalin Sayre, director of government banking for Sovereign Bank New England, the local operating unit of the Philadelphia-based bank. “He knows the efficiencies that are going to be brought to the table … implementation [of these systems] is supposed to happen sometime in the fourth quarter. We are focusing on the core operating systems – how [the government] writes checks, Internet access, real-time pay systems and check imaging.”

Sovereign presented government officials with cash management solutions, such as IRIS (Interactive Reporting and Initiation System), a Web-based information reporting and transaction initiation system, and Sovereign will provide banking services for the commonwealth’s core operating accounts.

“This is a great win for us. We entered into this market three years ago and no one thought we would survive. We’ve survived and we have proved that if the commonwealth is comfortable with us then other states can be comfortable, too,” said Sayre.

Sayre said the bank’s initial focus was to make sure that cash management products and solutions were state-of-the-art.

“Government banking and cash management are directly linked. Many banks will go into a government banking relationship just looking for a deposit, but we understand that a lot of these government entities are working on systems that they’ve had for five to 10 years and we really have taken it as part of our challenge to introduce our products to the municipalities to increase their efficiency,” said Sayre.

Capitol Idea

Moving beyond its Boston roots to jockey for national contracts, FleetBoston Financial plans to announce today that the bank is opening a government banking services office in Washington, D.C., that will deal solely with U.S. government agencies and service the products and services needed by the federal government.

To lead the bank’s new Washington operations, the $197 billion-asset institution has appointed Alphonso Maldon Jr., currently executive vice president and executive director of Fleet Federal Government Services and a member of Fleet’s Leadership Advisory Group.

“We are opening the office in Washington, D.C., as a FleetBoston Financial Services and Liaison office because, really, Fleet has not had a long history of doing business development with the federal government and we really felt like there were some good paybacks by being in Washington,” said Maldon. “The [Bush] administration started to take down some regulatory walls and … it just made sense that we should be here. I have a long history with the federal government and because I have a good understanding and now the [changing] market and the landscape, it made sense that a bank as large as Fleet should be in our nation’s capital.”

A Capitol Hill veteran, Maldon joined Fleet after time served as assistant secretary of defense for force management and policy under President Clinton. Maldon was also deputy assistant to the president for legislative affairs and White House congressional liaison to the U.S. Senate and House of Representatives and, earlier, deputy assistant to the president and director of the White House Military Office.

“As the head of the Washington office, I expect to be the go-to person here for any action involved in Fleet. That’s key because we haven’t had a presence here in D.C., before,” said Maldon.

Maldon said Fleet’s presence in Washington will allow the government relations side of the bank to be in closer proximity to existing clients, while strengthening Fleet’s ability to meet the needs of an expanding business with federal government contracts. The bank currently serves more than 3,500 government entities.

The Fleet office, located at 1100 New York Ave., will also be the primary servicing center for regulation, legislation and compliance issues involving action by Fleet.

Maldon said FleetBoston’s establishment of a branch in Washington will help the bank service federal government agencies with a specialized banking, financial and technology portfolio aimed at governmental agencies and government-sponsored businesses.

“We have relationship managers that work with the federal government and product specialists that work with the people,” said Maldon. “We build and sustain relationships with agencies of federal government and work with those agencies to determine what their needs are and strategically design what products and services they might need.”

FleetBoston’s Washington office will offer Libris Information Solutions – a special program for government agencies that includes document and remittance processing, data capabilities and document imaging. Maldon said that model, among others, will be used for cash flow analysis, account management, investment strategy analysis, investment bond proceeds, annual financial reviews, and lock-box services to 32 different agencies of the government.

Decisions about whether to focus on local municipalities or state and federal government differ from bank to bank, according to both Sayre and Maldon.

“There was a broad-based opportunity to grow our revenue business [in Washington]. We’ve done some work with the federal government for two years, but we felt that we could do a better job and provide better services and we could improve our services if we were located here in Washington. My understanding is that you need to have a presence here in order to do business here,” said Maldon. “I happen to know that it is very important to have a good relationship with the government. My goals and objectives are to be successfully implement a growth-oriented business with the federal government market. By putting the presence in Washington … it was the right thing [for Fleet] to do.”

Regardless of whether at the city, state or federal government level, industry experts say government banking can leverage funds and provide additional business opportunities for a variety of banks.

“In the government banking business, banks are always interested. It really is a great play on increasing your core deposits and it’s the complete tie-in to the cash management side of this business. A huge [user of] cash management [services] is the government – it used to be the large corporations – and many banks are getting involved,” said Sayre. “Sovereign has been more strongly focused for about a year now on government banking. Our footprint is the mid-Atlantic and New England regions and there is so much penetration that we need to get to before we consider a federal contract. Frankly, we are in this business a little bit later than some other banks, but we think we can do it better right here [in Sovereign’s core market areas].”