Foreign Banking and Investment in the United States: Issues and Alternatives

172 Pages·1976·14.188 MB·English

by  Francis A. Lees (auth.)

FOREIGN BANKING AND INVESTMENT
IN THE UNITED STATES
By the same author
INTERNATIONAL BANKING AND FINANCE
INTERNATIONAL FINANCIAL MARKETS
Foreign Banking
and Investment in
the United States
Issues and Alternatives
FRANCIS A. LEES
M
c Francis A. Lees 1976
Softcover reprint of the hardcover 1st edition 1976
All rights reserved. No part ofthis publication may be reproduced or
transmitted, in any form or by any means, without permission
First published 1976 by
THE MACMILLAN PRESS LTD
London and Basing stoke
Associated companies in New rork
Dublin Melbourne Johannesburg and Madras
SBN 333 19272 9
ISBN 978-1-349-02841-2 ISBN 978-1-349-02839-9 (eBook)
DOI 10.1007/978-1-349-02839-9
Library of Congress Catalog Card No. 76-4782
This book is sold subject
to the standard conditions
of the Net Book Agreement
Contents
List of Tables v1
List of Abbreviations vm
Pffface 1x
I Extent of Foreign Bank Representation in U.S.
1 The Worldoflnternational Banking 3
2 Extent of Foreign Bank Representation 9
3 Factors Accounting for Expanded U.S. Pres-
ence 17
4 National Representation Strategies 33
II Impact of Foreign Banking and Investment on
U.S.
5 Impact on U.S. Banking and Finance 45
6 Multinational Portfolio Management 72
III Policy Issues
7 Regulatory Issues and Alternatives 95
8 Lessons from the U.K. Experience 126
9 Problems and Issues 138
Appendix A. Statement of Condition of Foreign
Bank Branches, Agencies, Invest
ment Companies and Subsidiary
Banks in the U.S., 31 December
1974 145
Appendix B. Summary of New York Super
intendent's Denial of Barclays
Acquisition of Long Island Trust
Company 147
151
Notes
155
Selected References
Index 159
List of Tables
1-1 Principal Factors Relating to International Bank-
ing Role ofTen Major Countries 6
1-2 Global Network of Overseas Branches and Agen-
cies, 1973 7
2-1 States which Authorise Operation of Foreign Bank
Activities in their Juris diction 13
2-2 Foreign Banking Representation in the United
States by Type of Office and by State, 197 5 15
3-1 Assets and Liabilities of Foreign-Owned U.S.
Banking Institutions as of 31 October 1973 23
3-2 Growth of Assets held by Foreign Banks in New
York, 1950-73 25
3-3 State Chartered Subsidiaries of Foreign Banks as
· Percentage oflndustry in California 30
3-4 State Chartered Subsidiaries of Foreign Banks,
Domestic Deposits, Rank, and Percentage of
State Deposits 31
5-1 Deposits in Commercial Banks Facing Potential
Competition from Foreign Banks, by State, 31
December 1973 52
5-2 Analysis of Exposure to Potential International
Competition, by State, 31 December 1973 55
5-3 Foreign Ownership of Money Market Assets in
NewYork, 1973-74 59
5-4 Size Comparison of New York Money Market and
International Asset Categories, 1973-74 60
5-5 Reserve Requirements against Deposit Liabilities
in Selected States 67
6-1 Calculation of Expected Return and Dispersion of
Return from an Investment in U.S. by a
Foreign Bank 73
LIST OF TABLES Vll
6-2 Risk-Return Relationships on Domestic, Foreign,
and Global Investment Portfolio 75
6-3 Foreign Direct Investments in the United States 78
6-4 Estimated Deployment of Oil Producer Funds,
1974 89
8-1 Deposit Structure in U.K. Banks, 197 4 127
8-2 Comparison of International Banking Role of
United Kingdom and United States, 1973 133
List of Abbreviations
BBIL Barclays Bank International Limited
BBL Barclays Bank Limited
BHC bank holding company
CD certificate of deposit
FDIC Federal Deposit Insurance Corp.
lET Interest Equalization Tax
IMF International Monetary Fund
JFK John F. Kennedy
LIT Long Island Trust Co., New York
NYSE New York Stock Exchange
OFDI Office ofFo reign Direct Investments
OPEC Organization of Petroleum Exporting Countries
Preface
Banking has become one of the most interesting sectors in the
American business system. Several factors explain the recently
acquired dynamics of the banking field including the presence
of a new breed of competitive leaders, the perception of oppor
tunities in semi-isolated regional markets, government regu
lation and controls that strait-jacket free competition, and a
minor assault from abroad on what previously have been well
entrenched positions. In addition to providing incentives for re
considering the role of existing regulatory agencies, the new
dynamics contain possibilities of new entrants into the game of
regulation. For example, the Securities and Exchange Com
mission is watching the securities activities of American com
mercial banks with great attention.
My own interest in the subject of foreign banking in the U.S.
extends back into a prior study concerning the role of the
United States in international banking. In that study major at
tention was given to the activities and organisational strategies
of American banks overseas. However, it was also necessary to
include a detailed description and analysis of the role and
status of foreign banks in the United States.
Events during the past two years have heightened interest in
the expansion of foreign banking in the United States. Attitudes
in the U.S. appear to have changed somewhat given the realisa
tion by informed Americans that many foreign banks rank
closely with domestic institutions in size and competitiveness.
Policy changes 'may be around the corner, which adds to the
practical interest of this study. The recently enacted Foreign
Investment Study Act of 197 4 attests to the keen interest of
Congress in such matters. From a practical standpoint the
question of the future role of the United States as an inter
national financial center, the financial intermediation of inter
nationally lendable funds, and the viability of the new and