Foreign banks control almost one-third of U.S. banking assets, significantly more than previously estimated, according to Federal Reserve data.
The larger market share reflects some $329 billion in offshore assets that the Fed has calculated for the first time.
As of March 31, foreign banks held $1.2 trillion in U.S. loans and securities, according to estimates by the American Banker based on the Fed data.
Analysts Surprised
That represents about 30.5% of the $3.9 trillion U.S. market. Previous estimates had put foreign banks' market share at about 25%.
Analysts expressed surprise at the scope of the foreign bank operations. "I didn't think it would be that big," said Mark Gross, senior vice president of IBCA Limited, the London-based bank credit rating agency.
"If you're talking 30%, I would presume no other large major industrialized countries have such open markets and allow foreign banks to take such large market share."
Cayman Island Assets
Previous studies of foreign bank activity in the United States omitted assets booked at offshore offices of branches and agencies. The new figures reflect the holdings of 132 major foreign banks that make up the bulk of that market.
The Fed found that of the $329 billion in offshore holdings, around 90% were booked in the Cayman Islands.
Most of the rest was reported by branches licensed in the Bahamas, with the remainder booked in such other offshore centers as Panama, the Netherlands Antilles, and Turks and Calcos Islands.
Foreign bank branches and agencies have more than twice as much in offshore assets as U.S. banks, which control around $150 billion in the Cayman Islands and the Bahamas.
The extent of foreign bank operations has become clearer over the past two years.
Revised Data
In June 1992, the Fed reported that foreign banks controlled 45% of the U.S. loan market, up from previous estimates of 33%.
The revision also stemmed from first-time calculations of offshore activity. Many of those loans were originated by U.S. banks and sold to foreign institutions.
The latest findings reported in the October issue of the monthly Federal Reserve Bulletin, underscores the critical role foreign banks play in supplying credit and liquidity to U.S. financial markets and the U.S. economy,
Foreign banks U.S. branches and agencies have grown exponentially since 1972, when they reported $25 billion in U.S. assets.
Over the same period, the Fed reported, assets at the domestic offices of U.S.-chartered banks increased about threefold, to $3.6 billion.
Onshore Assets
The American Banker estimates that on March 31, foreign institutions held $871 billion in onshore assets: $683.1 billion by branches and agencies, $182.6 billion by subsidiary banks, and $5.3 billion by Edge Act subsidiaries and New York State investment companies.
Of the offshore assets reported by branches and agencies, about two-thirds were U.S. dollar-denominated claims on U.S. residents.
These included:
* $86 billion in claims on foreign banks U.S. branches and agencies, mainly intrabank funding of lending by related U.S. branches and agencies of Japanese banks
* Nearly $80 billion in commercial and industrial loans to U.S. companies, or around four times as much as was reported at the end of 1982.
* $16.5 billion in securities issued by U.S. residents, including the U.S. Treasury and federal agencies
* $13 billion in real estate loans
* $10 billion in non-dollar denominated claims on U.S. residents.
The balance of foreign banks offshore assets consisted of claims on parties outside the United States, including $40 billion in claims on residents in their homes countries and $48 billion in claims on third-party residents.
Nearly two third of the liabilities, or funding, of offshore branches of non-U.S. banks as of March 31 were in U.S. dollars and came from either their U.S. branches or agencies or nonrelated parties in the United States.
The new data sharply raises the previous estimates of banking assets booked by U.S. offices of banks from other countries.
Japanese Holdings
Among foreign banks, Japanese banks with offices in the United States were the single biggest foreign contingent.
Japanese banks held a total of $365.8 billion in U.S. assets as of March 31, including $50.4 billion in offshore assets.
French banks held a combined $119.3 billion in U.S. assets, including $42 billion in offshore assets, making banks from France the second biggest lenders in the U.S. market after Japanese banks.
