Following in the footsteps of Connecticut, Delaware is seeking to allow foreign banks to open branches in the state.
Delaware Bank Commissioner Tim McTaggart said legislation allowing foreign banks into the state could be adopted by the state legislature and enacted into law within the year.
Connecticut opened its door to foreign bank branches four years ago, betting that foreign banks, put off by the high cost of operating in New York City, would prefer the relative affordability of the Connecticut suburbs.
Connecticut's effort paid off big when Swiss Bank Corp.-now UBS-built a $145 million corporate center in Stamford last year. About 1,500 are now employed at the facility.
Though Delaware does not benefit from proximity to New York, it could still be attractive because of lower taxes and a bank-friendly legislative and regulatory environment, Mr. McTaggart said.
An agreement on foreign bank supervision is being prepared by members of the Conference of State Bank Supervisors.
A law passed in the previous legislative session allows Delaware banking supervisors to act as host-state supervisors as well as home-state supervisors, McTaggart said.
Until now, foreign banks could open only rep offices, agencies, or limited branches in Delaware. Limited branches may accept only deposits permissible for an Edge Act corporation, e.g., from foreign persons or governments, and those that are not subject to interstate federal branching restrictions.
Though Delaware does not now host any foreign branch offices, a legislative change could make it more hospitable to foreign bankers. Barclays Bank was in Delaware for some time but has since left. Furthermore, domestic banks are the largest private-sector employer in the state, thanks to low taxes and a favorable legislative and regulatory framework.
Still, it could be difficult to attract foreign institutions, a consultant said.
"U.S. banks chose Delaware because of the absence of usury law," he said. That would not apply to foreign banks, which have mostly wholesale operations. "Connecticut was attractive because of cheaper taxes, land, and proximity to Wall Street."
Delaware benefits from the two first conditions but may suffer from its distance from New York, the consultant said.