Community bankers urged regulators to block Wal-Mart Stores’s plan to open a bank at an unprecedented hearing in which the retailer defended the proposal and its record as a corporate citizen.

About 30 groups including the American Bankers Association and Independent Community Bankers of America told the Federal Deposit Insurance Corporation that Wal-Mart will siphon business from local banks, hurt lending in communities, and give the retailer a foothold to establish branches. A top Wal-Mart executive vowed not to open branches or make loans.

The hearings in Arlington, Va., are the first the agency has ever held on an application. The consumer groups and bankers testified that the company’s reputation for wiping out competitors and its poor track record on pay and health benefits should convince the FDIC to reject Wal-Mart.

“Wal-Mart’s application should be denied because the likelihood that the company will enter into retail banking poses an enormous unjustifiable threat to taxpayers, consumers, small communities, small business, FDIC insurance, and the soundness of our banking system itself,” a former representative, Thomas Bliley, who testified on behalf of the Sound Banking Coalition, said.

Mr. Bliley is a former House Commerce Committee chairman who oversaw securities laws. The coalition is a group of community bankers, grocers, and union workers who organized to oppose Wal-Mart’s plan.

The president of Wal-Mart’s financial-services unit, Jane Thompson, said the Bentonville, Ark.-based company will only use the bank to process debit, credit, and electronic-check transactions rather than pay third parties for that service.

“Wal-Mart is absolutely and unequivocally committed not to engage in branch banking,” Ms. Thompson said. “The purpose of the proposed bank would be to sponsor credit-card, debitcard, and electronic-check transactions – nothing more.”

Wal-Mart has no interest in opening branches because it now leases space in many stores to community banks and is committed to continuing that strategy, she said.

“Independent banks in our stores is our preferred and highly visible strategy,” Ms. Thompson said. These banks make Wal-Mart stores a destination and provide shoppers “a reason to come to our stores,” she said.

Ms. Thompson said Wal-Mart’s bank would have revenue of $10 million by the third year of operation. “It’s a little bank,” she said.

Her comments were greeted with skepticism by Wal-Mart’s opponents and members of the FDIC panel.

Wal-Mart’s promise not to open branches “is going to go a long way toward mollifying concerns” that the company is making “a creeping entry into the financial services business,” said a former federal bank regulator who is now a partner at Nelson Mullins Riley & Scarborough, Lawrence Kaplan.

“Once you make a commitment to a bank regulator, they’re going to hold you to that commitment.”

Wal-Mart in July applied in Utah for an industrial-bank charter to handle payment processing.

Industrial banks, also known as industrial loan corporations,were created at the turn of the last century to provide credit to low-income workers. They can offer loans and other banking services to their parent company’s customers.

Target, Toyota Motor, and General Electric are among non-financial companies that operate industrial banks.

Given Wal-Mart’s unsuccessful attempts to enter banking in the past, including efforts to buy a California bank in 2002 and an Oklahoma thrift in 1999, critics are skeptical about its claims it doesn’t plan to expand beyond payment processing.