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