As foreign banks have expanded their operations over the past few, years, the Institute of International Bankers, the main association representing this group of banks, has adopted an inceasingly prominent role.
Set up in 1966, the New York-based association has around 230 members out of nearly 300 foreign banks with offices in the United States.
As executive director and general counsel for the institute, Lawrence R. Uhlick has been the primary spokesman for foreign banks in the United States during lengthy, and frequently difficult, hearings in Congress on major regulatory agencies.
Mr. Uhlick joined the institute in 1987.
He previously had been a vice president and assistant resident counsel at Morgan Guaranty, Trust Co., where he was responsible for legislative and regulatory, matters and Washington activities.
Before that, he was vice president and counsel of the New York Clearing House Association. From 1970 to 1976, Mr. Uhlick practiced law with Davis Polk & Wardwell, New York.
In the following interview, he explores some of the issues currently of greatest concern to the association's members.
Q.: The administration has thrown its support behind a bill in Congress that would block expansion by banks from countries that don't allow U.S. banks to enter their markets. What is the institute's position on the proposed bill?
UHLICK: We support the principle of national treatment, and our policy has been not to object to legislation requiring other countries to provide reciprocal treatment.
However, we strongly believe that any legislation in this area must contain adequate flexibility so as to achieve the intended purpose of opening rather than closing markets.
Q.: What about interstate banking?
UHLICK We support interstate branching proposals, because they will produce enhanced efficiency for the industry generally and will enable all institutions, both domestic and international, to better serve the market.
We also believe that any legislation should give international banks national treatment so that they may branch in the same manner as domestic institutions, without being required to establish a U.S. bank subsidiary.
Last year's Treasury/Federal Reserve study concluded that it is neither necessary nor desirable to impose a subsidiary requirement generally or for the purpose of interstate expansion, citing among other factors the efficiencies of operating through branches.
The study pointed out that. U.S. banks generally operate. outside the U.S. through branches so as to also be able to utilize their worldwide capital to support their banking operations.
Q.: What are some of the major current issues facing foreign banks in the United States?
UHLICK: One of the more pressing issues deals with whether the Foreign Bank Supervision Enhancemen Act requires international banks to pay for Federal Reserve Board examinations in addition to the examination costs they currently pay to the state banking departments or Comptroller of the Currency.
Because state member banks are not required to pay for Federal Reserve exams, imposition of double exam fees on international banks would raise fundamental questions of fairness and national treatment.
We are hopeful that Congress will pass legislation explicitly providing the Federal Reserve Board with the same discretion regarding examination fees for international banks as they have for domestic institutions.
Q.: What is the institute and how would you define its role?
UHLICK: The institute was established to create a forum for the discussion of issues of importance to the international banking community and currently has over 220 members that operate in the United States but have their headquarters in 50 other countries.
The institute functions like other banking associations in seeking to address the legislative, regulatory, and tax problems confronting its members.
On broad issues affecting the U.S. banking industry, we support the efforts of the ABA and other organizations to modernize the U.S. laws governing the financial services industry and to reduce regulatory burden.
However, because most of our members operate in the United States through branches and agencies, there are a host of issues that essentially affect only the international banking community.
It is primarily these questions that the institute seeks to address and the number of such issues that has increased significantly over the last few years because of the U.S. regulatory climate.
Q.: Do you believe that international banks will play an increasingly important role in the United States?
UHLICK: Because of the size of the U.S. market and the continuous innovation in products and services it creates, I believe that international banks will remain committed to this market.
However, the benefits that both international and domestic banks bring to the United States could be enhanced if there were a modernized legal structure for the financial services industry and a more favorable regulatory climate.
Q.: What are some of the benefits to the United States from international banks' operating in the United States?
UHLICK: Based on the institute's recent survey of over 200 institutions, international banks last year employed directly at least 115,000 persons and created an additional 190,000 jobs throughout the United States.
Total annual expenditures attributable to the activities of international banks were approximately $20 billion.
In addition, as participants in U.S. markets, international banks increase the overall depth and liquidity of the U.S. financial system directly by means of credit to U.S. businesses and government and indirectly through participations in credits and purchases of loans arranged by U.S. banks.
Q.: Your institute recently conducted a worldwide study of banking powers in various countries. Do you think any lessons can be drawn from that study?
UHLICK: The institute's 1993 survey, covering 45 countries and the European Community, provided clear evidence of the fundamental integration of banking and other financial services in most countries, with the United States lagging behind this trend, and showed quite dramatically how the Basel risk-based capital standards have become the international norm.
Q.: Tax-related issues, for example, are becoming increasingly troublesome for many foreign banks. What are the main issues and how you think these might be resolved?
UHLICK: We are quite concerned about the treatment of interbranch trading of foreign exchange, swaps, and other financial products.
Like the offshore branches of U.S. banks, the U.S. branches of international banks often want to hedge their trading transactions with the bank's head office.
The U.S. tax rules need to be clarified so that arm's length, interbranch transactions will be taken into account for tax pruposes.
Otherwise, I am concerned about the negative effect on the vitality and depth of the U.S. markets for these instruments if international banks are forced to transfer these trading activities elsewhere.
