April 1981

Behind Miami's Surge in International Banking

Miami's international banking activity has expanded substantially since 1969. Regulatory changes have made the Edge Act corporation a more viable entity. Florida's legal and tax structure has become more accommodating to international financial development. And banking activity with Latin American individuals and nonfinancial firms has surged.

In the past two decades, Miami has emerged Edge Act Corporations as one of the new international banking cen- » ters. The move to Miami by major U. S. and foreign banks has been stimulated by both It was not until 1969 that a non-Florida regulatory changes and economic factors. U. S. bank entered the Miami international banking market. In that year, the Georgia- International Banking from Miami: based Citizens and Southern National Bank The Cast of Participants opened the first Edge Act corporation in Miami. Edge Act corporations are restricted to International banking from Miami consists international transactions. Since 1969, 21 of locally based commercial banks, Edge Act more banks have entered Miami's banking corporations set up by out-of-state and market as Edge Act corporations; another 11 foreign banks, and foreign bank agencies and have applications approved or pending (see representative offices. Using June 1980 data, Table 3). transactions with the Caribbean Basin and the rest of Latin America constituted at least half, All New York banks with banking Edges and regularly 80 to 90 percent, of Miami's have or have applied for Miami presence. commercial bank, Edge, and agency activity Four of the six California banks and three of with foreigners. the four Chicago banks with banking Edges also have active or pending Miami presence. Commercial Banks The future growth of Edge Act corporations in Miami, however, will be through expanding Several of Miami's commercial banks have use of Edge Act powers by foreign banks and had active international departments for by U. S. regional banks. Currently, 22 U. S. years. In recent years, their number has regional commercial banks have banking grown steadily. Currently, more than 20 Edge Act corporations or Edge branches in the commercial banks have "active" international U. S.; nine have established or applied for departments (see Table 1). This growth has Miami presence. Foreign banks, now eligible been stimulated by competitive factors, by for Edge Act corporation establishment, have the increasing numbers of Latin Americans just begun to utilize the Edge Act vehicle. The traveling to Miami, and by an international rapid expansion of Edge Act corporations and orientation stimulated by foreign acquisition their branches in Miami has been induced of Florida commercial banks. In fact, nine of not only by the expanding internationalism of the commercial banks with active interna- the city but also by regulatory changes mak- tional departments are foreign-controlled (see ing the Edge Act corporation a more viable Table 2). entity (see box).

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be on a par with those federally chartered.1 TABLE 5 Now all foreign bank agencies in Florida may deal fully in domestic and international The Miami Bank Participants in International Banking (as of December 31, 1980) credits and can accept nonresident (foreign)

Commercial Banks Edge Act Corporations (continuedÌ deposits. Creditbank Agencies are limited to credit balances Bank of Miami Barnett Bank Marine Midland Inter American Bank reflecting international transactions. Rep- Capital Bank Mellon International Company-' Central Bank and Trust Merchants International Bank' resentative offices are prohibited from un- Central National Bank Morgan Guaranty International Bank City National Bank ot Miami dertaking deposit or lending activity and may New England Merchants Bank International Coconut Grove National Bank Northern Trust InterAmerican Bank only represent their parent bank. Through Dadeland National Bank Republic International Bank of New York First National Bank of Greater Riggs International Banking Corporation' December 1980, 16 foreign banks had set up Miami J Henry Schroder International Bank Florida agencies; three more foreign banks First State Bank of Miami Security Pacific International Bank Flagship Banks. Inc Shamut Boston International Banking had agency applications either approved or Florida National Bank Corporation' International Bank of Miami United California Bank International pending. Another four foreign banks have set intercontinental Bank Wells Fargo InterAmerican Bank Pan American Bank up or are in the process of opening Miami Peoples Downtown National Bank representative offices. Republic National Bank Royal Trust Bank of Miami Foreign Bank Agencies Southeast First National Bank Banco de Bilbao Southeast First National Bank Banco Central' International Banking from Miami: The Totalbank Banco de la Nacion Argentina Banco de la Provincia de Buenos Air Deposit (Liability) Structure Banco de Santander Edge Act Corporations Banco de Viscaya Algemene Bank Nederland' Banco do Brasil Miami's internationally oriented banks ac- American Security Bank International Banco do Estado de Sao Paulo Banco de Bogota International Banco Exterior de Espana cept over four-fifths of their foreign deposits Banco de Santander International Banco Industrial de Venezuela' from individuals and nonfinancial firms (see Banco de Venezuela International' Banco Real BankAmerica International Bank Hapoalim Table 4). Total U. S. bank liabilities to indi- Bank of Boston International of Miami Bank Leumi Le-lsrael 1 Bank of New York International Bank of Nova Scotia viduals and nonfinancial firms, in contrast, Bankers Trust International—Miami Barclays Bank International' represented only 15 percent. Nearly two- Chase Bank International—Miami Credit Suisse' Chemical Bank International of Miami Israel Discount Bank Citizens and Southern International Bank thirds of the Miami deposits from foreigners Lloyds Bank International Citibank International Royal Bank of Canada are placed in time deposits. Continental Bank International Standard Chartered Bank European American Bank International' The foreign agencies in Miami, however, First Chicago International' First Palm Beach International Bank' depend primarily on their affiliated bank First Union International Bank' Foreign Bank Representative Offices Irving Trust Company International/Miami Banco internacional de Costa Rica offices abroad for funds. Since Florida foreign Manufacturers Hanover International Bank of Tokyo Ltd Banking Corporation Credit Suisse' bank agencies can now accept foreign de- Dow Banking Corporation' posits, their share of such deposits should expand in the future. In spite of the large influx of out-of-state

' Approved, unopened and out-of-country banks into Miami's inter- 1 Application pending national banking market, Miami's commercial banks still dominate the city's foreign deposit activity (see Table 5). Edge Act corporations, however, have de- veloped the largest deposit activity with foreign official institutions.

Foreign Bank Agencies International Lending—What Is the Depth of Miami's International Banking Center? In 1977, Florida furthered its international banking development by authorizing foreign While Miami-based commercial banks bank agencies and representative offices. At dominate in liability activity with foreigners, first, foreign bank agencies set up under the Edge Act corporations do more than half Florida state charters were limited to interna- tionally oriented credits and to nondeposit activities. Since enactment of the U. S. Inter-

national Banking Act of 1978, which set up 'See E. N. Roussakis, "Foreign Banks in Miami's International Banking mechanisms for establishment of federally Community," Miami School of Business and Organizational Sciences, Florida International University, 1980. Professor Roussakis has also recently chartered agencies, Florida has altered its written two companion manuscripts on Miami's international banking, "Edge Act Corporations in Miami's International Banking Community" and regulations on foreign bank agencies so as to "Local Banks in Miami's International Banking Community."

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TABLE 2 Known and Pending Foreign Acquisitions of Florida Commercial Banks (Through November 5,1980)

New Name of Bank Nationality Acquired Bank (if changed) Name of Acquirer of Acquirer American Bank of Orange County Royal Trust Bank of Orlando Royal Trust Company Canada Bank of Culler Ridge Creditbank J L. Calonge Spain Bank of Miami Beach Intercontinental Bank J. Castell Lastortras Spain Family Bank o( Perrine' No name change F Corea Maya and Colombia F. H. Saldarnaga

Baymeadows Bank Royal Trust Bank of Royal Trust Company Jacksonville Biscayne Bank No name change M. Espirito and S. Silva Portugal Central National Bank ot Miami No name change Sabrían Properties/ Colombia Eagle National Holding Company

Dale Mabry State Bank Royal Trust Bank of Tampa Royal Trust Company Canada Dania Bank No name change J. J- Gonzalez Venezuela Gorrondona, Jr Deerfield Beach State Bank- No name change MFG Investments/ Venezuela J. Alvarez Stelling Fidelity National Bank of International Bank of Miami Banco Internacional Spain South Miami de Comercio1 First Bank of Gulfport Royal Trust Bank of Royal Trust Company Canada St Petersburg First Bank of Pembroke Pines Royal Trust Bank of Royal Trust Company Canada Broward County First City National Bank No name change Canadian and Dutch Canada/Netherlands of Jacksonville Investors First National Bank of J Alvarez Stelling/ Venezuela First National Bank of Hialeah Greater Miami MFG Investments J. Castell Lastortras Spain Flagler Bank Intercontinental Bank Family E Safra/SafraCorp Brazil Flagship Bank of Adventura SafraBank Flagship National Bank Dadeland National Bank Spanish and South Six countries' of Dadeland American Investors International Bank of Miami Royal Trust Bank of Miami Royal Trust Company Canada Miami National Bank No name change Banco Zaragozano Spain Pan American Bank of Coral Caribank J. J Gonzalez Venezuela Gables Gorrondona, Jr Republic National Bank No name change Rebank Corporation/ Ecuador of Miami Isaias Family No name change A. Robles Chiara and Panama/Honduras Sunshine State Bank J. Andonie Fernandez No name change F E. Blanco Spain Totalbank Worth Avenue National Bank Royal Trust Bank of Royal Trust Company Canada Palm Beach

• Owned by H. V. Rojasand J. Michaelson Uribe.2 Plus two other groups of Spanish investors.'Colombia, Costa Rica, El Salvador, Guatemala, Panama, and Spain.4 Pending. Sources: W. Longbrake, M. Quinn, and J. Walter, Foreign Ownership of U. S. Banks: Facts and Patterns, Washington, D. C., Office of the Comptroller of the Currency, 1980, plus Office of the Comptroller of the Currency and Board of Governors of the Federal Reserve System updated information, and Mira Wilkins, "Impact of Non-U.S. Investment on Florida's Resources and Enterprises," Report to the Office of the Secretary of State, Miami, Florida International University, 1980.

of Miami's direct lending abroad. Excluding A quarter of Miami's foreign lending is to funds placed with affiliated foreign bank unaffiliated foreign banks; much of this is offices, the Edge share jumps to nearly through lines of credit established with cor- two-thirds. respondent banks abroad. Only a minor por- Lending to nonfinancial firms and individu- tion is lent directly to foreign governments als abroad constituted a third of Miami's and other official institutions. Significant bank foreign lending at the end of June 1980 (see lending to public borrowers is generally done Table 4). The relatively heavy concentration through large-scale syndicated credits which on such lending reflects, as on the liability traditionally have been booked in money side, the importance of foreign personal and centers. The capital base of the Edge Act cor- nonfinancial entity transactions to Miami. porations, particularly before the IBA induced

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TABLE 5 Banking Edges and Edge Branches in the United States, by Year of Establishment* (Through December 31,1980)

Los New San Chicago Houston Angeles York Francisco New York Banks Bank of New York 19802 1 9802 19802 Bankers Trust 1974 1974 1973 1974 Chase Manhattan 1974 1974 1970 1972 Chemical 1964 1980* 1979 1973 Citibank 1972 1972 1970* 1971 1977* 1980* European American 1979 19802 Irving Trust 1 9802 1974 1972 19802 (All/Dallas)' Manufacturers Hanover Trust 19805 1980= 1973* 1979 Marine Midland 1 9802 19802 1979 Morgan Guaranty 1974* 1980 1977 1972- Republic National Bank of New York 1980 1979 J. Henry Schroder Bank & Trust 1980 California Banks Bank of America 1972* 1972* 1972* 1950* 1980" Bank of California 1966 Crocker 1973 1967 Security Pacific 1980* 1980" 1980* 1967 United California 1980" 1 9805 1980* 1962 Wells Fargo 1971 1964 Chicago Banks Continental Illinois 1974* 1972* 1979* 1962* 1980" 1980*"* First National Bank of Chicago 1979 1973* 1980* 1962 1974" 1980 (Boston) Harris Trust 1971 Northern Trust 1974 1968 Regional Banks Allied Bank' 1968 American Security (Washington, D.C.) 1980 Central National Bank of Cleveland 1968 Citizens and Southern (Georgia) 1969 1972 (New Orleans) Connecticut Bank & Trust 1972 Fidelity Bank (Pennsylvania) 1968 First National Bank in Dallas 1978 First National Bank of Boston 1980" 1974 1972 1959 ,1980 (Dallas)* First National Bank of St. Louis 1980 = First Wisconsin Bank of Milwaukee 1972 First National Bank of Palm Beach (Fla.) 1 9802 Girard Bank (Pennsylvania) 1969 Mellon Bank (Pennsylvania) 19802 1963 Merchants National Bank & Trust (Ind.) 19802 New England Merchant Bank (Mass.) 1980* North Carolina National Bank 1973 Philadelphia National Bank 1967 Pittsburgh National Bank 1980* Rainier National Bank (Washington) 1963 1969 Riggs National Bank (Washington. D C.) 1980 5 Shamut Bank of Boston 1980* State Street Bank & Trust Company (Mass.) 1965 Wachovia Bank & Trust (N. C.) 1973 Foreign Banks Algemene Bank Nederland 1980 1980" 1980* 3 Banco Consolidado del Centro 1980 Banco de Bogota (Colombia) 1980 Banco de Santander (Spain) 1980 Banco de Venezuela 1980* Banco Real 1980* 1980s Banque de Paris (France) 1979 Skandinaisske Enskilda Banker 1980* Standard Chartered (England) 1980" Total 14 16 14 33 28 25

Includes only Banking Edges located outside the Banks headquarter city This list also includes Edges approved in 1980. But unopened as well as Edges with applications pending 1 A |Ointly owned Edge by a number ot U S regional banks » Application pending » With First National Bank of Greater Miami * Now an Edge Act corporation Branch. The date refers to the bank s first Edge Act corporation presence in the city not necessarily the date of restructmg of an existing Edge Act corporation into a Branch of another Edge > Approved unopened Edge Act corporation or Edge branch

"(Atlanta1 Beverly Hills .Cleveland Dallas . Minneapolis'. St Louis*. Seattle1) "(Atlanta Boston Cleveland'. Dallas Minneapolis'. St Louis Seattle) •••(Cleveland Dallas Minneapolis Philadelphia Seattle )

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TABLE 4 TABLE 5 Miami International Banking—Distribution Miami International Banking—Market Share of Activity with Foreigners of Activity with Foreign Entities (Percent of Total, June 1980) (Percent of Total, June 1980)

Com- Edge Act Foreign Com- Edge Act Foreign mereiai Corpo- Bank mercial Corpo- Bank Banks rations Agencies Total Banks rations Agencies Total

Reporting Entity's Own Claims On Reporting Entity's Own Claims On:

Foreign public borrowers 5.1 5.0 19.0 6.2 Foreign public borrowers 31.7 42.8 25.5 100.0

Unaffiliated foreign banks 78.5 25.7 23.0 25.4 Unaffiliated foreign banks 38.7 53.7 7.6 100.0 Own foreign offices 23.1 25.9 34.9 Own foreign offices 58.7 35.1 6.2 100.0 All other foreigners 16.4 46.2 32.1 33.5 All other foreigners 18.9 73.1 8.0 100.0 Total 100.0 100.0 100.0 100.0 Total 38.6 53.0 8.4 100.0

Reporting Entity's Own Liabilities To: Reporting Entity's Own Liabilities To:

Foreign official instit. 0.5 6.6 — 3.2 Foreign official instit. 11.4 88.6 - 100.0

Unaffiliated foreign banks 5.5 8.3 2.9 7.7 Unaffiliated foreign banks 51.4 46.0 2.6 100.0

Own foreign offices — 1.6 90.7 6.9 Own foreign offices — 10.1 89.9 100.0

Allother foreigners 94.0 83.5 6.4 82.2 All other foreigners 65.2 34.4 0.4 100.0 Total 100.0 100.0 100.0 100.0 Total 59.2 35.2 5.6 100.0

Source: U. S. Department of the Treasury. Source: U. S. Department of the Treasury.

capital consolidation, limited the size of generated more funds from abroad than it Edge-organized syndicated credits. has been able to place directly abroad. The lack of a significant interbank market in Miami has tax advantages over New York. credit participations or in acceptances keeps The Florida legislature has exempted interna- Miami from being a full money center. Many tional transactions from intangible and Miami Edges and foreign agencies sell par- documentary taxes. It is considering legisla- ticipations of large loans to their parent and tion to fully exempt the proposed interna- affiliate banks rather than to competitor tional banking facilities (IBFs) from all state banks. Bankers acceptances traded by Miami and local taxes; New York has already done Edges are also typically sold to an Edge's so. The establishment of IBFs in Florida could parent bank rather than in the marketplace— add another dimension to Miami's interna- this in part is due to a lower rating given in tional financial development and encourage money markets for bankers acceptances is- additional Miami Edge Act corporations, par- sued by an Edge compared to the parent ticularly from banks without New York bank. Because Miami is in the same time offices. zone as New York, and because of the speed of fund transfers, the development of a full money center in Miami is viewed by some International Banking From Miami — participants as unrealistic. A Perspective Nevertheless, a limited interbank market is likely to develop. As of June 1980, Miami In slightly more than a decade, Miami's banking entities placed a third of their inter- international banking has expanded from a national claims with their own affiliated relatively small number of Miami-based foreign offices abroad. These funds are commercial banks into a banking center with placed into interbank Euromarkets and largely a diversified cast of participants which in- represent excess funds. Miami, for years, has clude major banks in the U. S. and the world.

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Geographic Distribution of Miami Banking Activity with Foreigners (June 1980)

Claims On: Liabilities to:

Commercial Banks Edge Act Foreign Agencies Commercial Banks Edge Act Foreign Agencies Corporations Corporations

Still, it is important to maintain a perspec- official institutions, and unaffiliated foreign tive. Miami's emergence into a Caribbean and banks. So Miami has ample room to grow. As Latin American banking center is still in a interbank transactions increase, as bank development phase. The city's forte, so far, clearings become more efficient, as the cast has been the development of activity with of participants expands, and as International Caribbean and Latin American individuals and Banking Facilities become incorporated, Miami nonfinancial firms. Miami accounts for a sixth will emerge more and more as a Caribbean and of U. S. bank demand and time deposits from Latin American banking center. The continued these sources. However, less than 5 percent expansion of Miami's international commerce, of U. S. parent bank lending to individuals transportation, and tourism will complementthis and nonfinancial firms in the Caribbean and growth. 0EJ Latin America is out of Miami. Miami ac- counts for a similarly small proportion of U. S. bank claim and liability activity with —Donald E. Baer Caribbean and Latin American governments,

The Edge Act Corporation-A rations were set up in New York by tion stem from the 1978 International Regulatory Perspective California, Chicago, and regional banks. Banking Act (IBA) and accompanying The 1970s witnessed a quite different alterations to the Federal Reserve Sys- Edge Act era. Not only did the number of tem's Regulation Ki Some of the most Edge Act corporation formation was set banking Edge Act corporations triple important regulatory changes on Edge out in the 1919 amendment sponsored by (from 24 in 1970 to 70 in 1979), but Edges Act corporations are detailed in the ensu- New Jersey's Senator Walter Edge. The also dispersed geographically, mainly to ing sections. amendment, which permits establishment Chicago, Houston, Los Angeles, Miami, of internationally oriented banking sub- New York, and San Francisco. The Edge Edge Act Corporation Orientation sidiaries beyond a bank's own state, was Act expansion is far from over. In 1980 years before its time. It was not until 1950 alone, 65 new banking Edge Act corpora- that a bank actually set up a "banking"' tions and their branches have applica- Edge Act corporations have always Edge. The 1960s saw formation of tions approved or pending (more than in been limited to dealing with the interna- another 20 "banking" Edge Act corpora- the first 58 years of the amendment's tional transactions of U. S. firms and with tions; nearly all of these Edge Act corpo- existence). persons and entities abroad. In turn, each What has motivated this surge in Edge Edge Act corporation is required to Act corporation formation? The answer is explicitly publicize its international orien- complex. The increasing importance of tation through the requirement that its 1 Banking Edges, upon which this article concentrates, international trade and international name include "international," "foreign," are regulatorily defined as those Edges regularly accepting deposits in the U. S. from nonaffiliated banking to the U. S. economy explains, in "overseas," or some similar word. persons. The other class of Edge Act corporations, part, this surge. The liberalization of Edge commonly referred to as the investment" Edge, is Act corporation regulation is also inducing often established in the same city as the parent bank 2 Copies of Regulation K can be obtained by writing to and generally has confined its activities to its bank's renewed interest in the Edge Act corpora- the Service Department of the Federal Reserve Bank investments abroad. tions. These changes in Edge Act regula- of Atlanta, P. O. Box 1731, Atlanta, Georgia 30301.

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With U. S. entities, Edges have been consolidated Edge Act corporation's cap- First, Edge Act corporations may be set 4 generally confined to trade finance- ital and surplus. To assure sufficient up in any U. S. state and are not limited to oriented activity. The IBA has extended capitalization, the Board established that those states accepting foreign bank 6 permissible Edge Act activity to include risk assets of Edge Act corporations shall agencies or branches. Second, Edge Act the financing of the costs of production of not exceed 7 percent of the Edge's capital corporation establishment does not re- goods and services exported.3 The Board and surplus. This replaces the previous quire reciprocity from the applying bank's of Governors of the Federal Reserve requirement which stated that aggregate home country. Several U. S. states re- System is reviewing the effects of possi- outstanding liabilities on accounts of ac- quire such reciprocity for agency and/or 7 ble extension of Edge Act corporation ceptances, monthly average deposits, branch charter. The reciprocity issue is activity to include "full-service" banking to borrowings, guarantees, endorsements, significant to many Basin economies qualified internationally oriented business debentures, bonds, notes, and other such which have placed restrictions on foreign entities (e.g., a firm which conducts two- obligations could not exceed 10 times the bank operations in their own countries. thirds or other such determined proportion Edge's capital and surplus. of its sales abroad). Edge Act corporations, as seen, are Reserve Requirements and Deposit subsidiaries and not fully integrated com- Edge Act Corporation Branching Liabilities ponents of their parent bank, as an in the U.S. agency or branch may be. This separa- Edge Act corporations were subject to a tion, an advantage to foreign banks where Until the IBA-induced changes, each minimum 10-percent reserve requirement consolidation would subject the foreign Edge Act corporation had to be separately on deposit liabilities. This resulted in office to more restrictive parent bank incorporated. Formation of an Edge Act higher required reserves on certain Edge reserve requirements, obligatory invest- corporation required a minimum $2- deposits than those imposed on Federal ments, etc., may be particularly important million capitalization. Edge Act corpora- Reserve System member banks. The to Latin American banks operating in tions, as with national banks, were subject 1979 revised Regulation K eliminated highly bank-regulated economies. to the provision that no loan could be such separate treatment and now sub- Edge Act corporations may accept in- made to any single borrower which was jects Edge Act corporation deposits to the ternationally related demand, time, and greater than 10 percent of that Edge's same reserve requirements (and interest savings deposits from U. S. clients as well capital and surplus. This provision, rate ceilings) as member banks. Edge Act as from entities and persons abroad. therefore, both induced larger-than- corporations may now accept savings Agencies are limited to more restrictive minimum capitalization and, at the same deposits and issue negotiable certificates "credit balances" with domestic clients. time, limited large-scale loans being of deposit; previously, Edge Act corpora- Although U. S. Comptroller of the Cur- booked by the Edges. Larger loans re- tions were limited to demand and certain rency interpretations permit federally quired complex accounting practices as time deposits. All Edge Act deposits must chartered agencies to accept deposits the Edge participated portions of the loan have an international orientation, either from foreigners,8 many state-chartered to their parent bank or other affiliated involving an entity residing or operating agencies cannot. Florida altered its entities. abroad or with U. S. entities where the state-chartered agency treatment in early deposit involves an international transac- 1980 to place their state-chartered agen- The June 14, 1979, revised Regulation tion. cies on a par with Federal agencies, K has affected Edge capitalization and, thereby permitting agencies to accept therefore, intrinsically the size of loans offshore deposits. that can be booked by any single Edge Act The Edge as an Optional Form for office. The revised Regulation K also Foreign Bank Establishment Edge Act corporations operate with permits an Edge Act corporation to estab- some disadvantages compared to foreign lish branches in the U. S., subject to Until the IBA, foreign banks were prohi- agencies or branches. First, by definition, Federal Reserve approval. This revision, bited from establishing Edge Act corpora- Edge Act corporations are restricted to therefore, permits establishment of Edge tions. The IBA eliminated this restriction international activities. Foreign bank branches without requiring a separate and, in effect, gave foreign banks "na- agencies and branches, on the other capitalization of each office. A bank with tional treatment" in regard to Edge Act hand, may lend to finance purely domestic several Edge Act corporations can con- corporation establishment.5 The Edge Act activities. Edge Act corporations require solidate its capital into a single Edge Act corporation has several distinct advan- separate incorporation and a $2-million corporation and have the separate Edge tages and disadvantages as compared to minimum capitalization. Lending, as offices operate as branches. This a foreign bank's other options (e.g., an seen, is compared to this capitalization. branching provision should reduce the agency, branch, or subsidiary bank ac- Agency lending is not so restricted. No costs of entering and operating at new quisition). separate capitalization is required for locations. Ultimately, exporters and im- agency establishment, although a capital porters should encounter larger and more equivalency deposit is required.9 HRl competitive international banking entities.

The consolidation of individual Edge 4 Extensions of credit to one person by a member bank Act corporations into a single corporation and by its Edge corporation and foreign direct and with multiple branches also expands the indirect subsidiaries may not exceed the member bank's lending limit. lending limit of any single Edge office. 6 The Banque de Paris Edge Act corporation in Houston 5 Edge Act corporation ownership, as set out by the IBA, Lending to a single borrower now consti- shall at all times be held by citizens of the U. S., is an example of a foreign bank operation in a state tutes the entire Edge Act corporation corporations, firms or companies majority owned by (Texas) which does not permit foreign bank agencies lending to that entity compared to the U. S. citizens, or held by one or more foreign banks or or branches. by banks in the U S. controlled by foreign banks. ' It should be recognized that federally chartered agen- Banks in the U. S. owned by foreign individuals, cies and branches do not require such reciprocity. however, may not be majority owners of Edge Act »Federal Register, Vol. 44, No. 220, November 13, corporations. The Board of Governors has recom- 1979. 3 The provision requires that either an export order be mended to Congress that the Board be given authority 9 Five percent of an agency's liabilities are to be obtained or that the items produced are identifiable as to permit majority ownership of Edge corporations by a maintained in deposits in other qualified banks or in for export. U S. bank controlled by foreign individuals. eligible securities as a "capital equivalency deposit."

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