Foreign borrowers owed U.S. banks $503.5 billion in the first quarter, 2.5% less than in the fourth quarter, the Federal Reserve Board said Wednesday.

Lending exposure to Japan dropped by $12.6 billion, to $39.1 billion. Exposure to all G-10 countries and Switzerland was down $13.8 billion, to $304.5 billion.

Money-center banks cut lending exposure overseas by $14.3 billion, to $414.7 billion.

Again, most of the pullback was from Japan, where the money-center banks -Bank of America Corp.; Bank One Corp.; Deutsche Bank's U.S. operation (the former Bankers Trust Corp.); Chase Manhattan Corp.; Citigroup Inc.; and J.P. Morgan & Co.-reduced their exposure by $12.9 billion, to $32 billion.

Money-center banks reduced exposure to G-10 countries and Switzerland by $14.5 billion and to Eastern European countries by $916 million.

Lending exposure of U.S. banks remained steady in Latin America and the Caribbean, at $66.9 billion; in Asia, at $35.3 billion; and in Africa, at $1.7 billion.

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