Foreign Banks' Lack of Retail Business Here Restricts Expansion in

After rapidly building up their asset securitization programs in the United States, big foreign banks are keen to expand them further in this country. But scant retail operations here limit their options.

Most foreign banks securitize only corporate receivables here, although they've been big buyers of asset-backed securities as well as major providers of credit guarantees to enhance asset securitization programs.

According to Federal Reserve Board figures, the amount of commercial paper backed by corporate receivables has increased dramatically, from $29 billion in 1991 to $55 billion as of November.

Of that amount, commercial paper issued by corporations owned by foreign banks or foreign banks in conjunction with U.S. banks amounted to $21.5 billion in 1994.

However, few foreign banks are able to securitize credit card assets or mortgages because they don't have the retail banking operations to generate consumer receivables.

Although these banks would dearly like to transplant some of the skills learned in U.S. asset securitization to their native countries, few have been able to. Their home markets are smaller, for one thing, and numerous restrictions do not allow foreign banks to transfer assets, such as bank loans, to third parties.

The upshot is that big Canadian, Swiss, German, French, and Japanese banks are still concentrating mainly on expanding or launching new special purpose conduits for commercial paper, even as conditions for distributing such paper grow more difficult.

"It's a very competitive market," remarked Douglas Murray, a managing director for asset-backed securities at Fitch Investors Service LP in New York.

"There are a lot of programs out there, and I wouldn't be surprised if there was some consolidation."

Adds one industry executive who declined to be identified: "There's still quite a bid of demand out there but, unfortunately, supply is growing faster than demand."

For the most part, foreign banks have developed their operations here by setting up special purpose companies that issue commercial paper or medium- term notes backed by corporate, or trade, receivables.

One of the biggest players is Canadian Imperial Bank of Commerce, which runs Asset Securitization Cooperative Corp., a $5.7 billion program with some $3.8 billion in commercial paper outstanding.

France's Societe Generale runs a $2 billion program under Barton Capital Corp., with some $410 million in commercial paper outstanding.

Meanwhile, Bank of Tokyo runs Broadway Capital Corp., a $2.5 billion program with more than $1 billion in commercial paper outstanding, while Holland's ABN Amro has issued more than $1.2 billion in commercial paper since it launched a specialized securitization program through Windmill Funding Corp. in June 1993.

Executives with foreign banks say the main attraction of such programs is that they provide fee-based income while moving loans off the books, freeing up scarce and costly capital that can be used to support additional transactions.

"It allows an existing amount of capital to support a higher volume of business and provides additional opportunities for our trading and sales groups," observes Robert Martin, president and chief executive of Deutsche Credit Corp., the Deerfield, Ill.-based asset-backed finance unit of Germany's Deutsche Bank.

Foreign banks believe they have room to expand asset securitization despite any current drawbacks and some foreign banks with U.S. retail banking operations are also said to be looking into securitizing consumer, in addition to corporate, receivables.

National Westminster Bancorp last month set up a Delaware-based subsidiary for its credit card and other consumer receivables.

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