A bank owned by Ecuadorans and based in Miami claims the Federal Reserve improperly classified it as a foreign bank, forcing it to drop a planned acquisition.

Republic National Bank of Miami squelched its deal to acquire Family Bank of Hallandale, Fla., two weeks ago because the foreign-bank classification would have meant at least a yearlong wait for Federal Reserve approval - about three times as long as domestic banks must wait, said Oscar Bustillo Jr., chief executive of the $1.3 billion-asset bank.

"This puts us out of the playing field," he said. "The OCC regulates us and does not consider us a foreign institution, but when we want to buy a bank, we're considered a foreign bank."

However, Bobbie McCrackin, a spokeswoman at the Federal Reserve Bank of Atlanta, contradicted Mr. Bustillo's claim. She said the Fed did not consider Republic National a foreign bank. Its application process might take longer than usual because of a required background check of the bank's foreign owners, she said.

Mr. Bustillo nevertheless said that such a long application process creates anxiety among the target bank's personnel and customers, making a deal not feasible.

Mr. Bustillo visited the Federal Reserve in Washington last November to request a waiver from the Foreign Bank Supervision Enhancement Act of 1991. The law applies to all foreign-owned banks, requiring, among other things, approval from the Federal Reserve for any acquisition of at least 5% of a U.S. bank's stock.

He said that the Fed informed Republic National this month that it would not be exempted from the act. Ms. McCrackin, however, said the foreign bank act did not apply in this case. Republic National's acquisition would have been reviewed under the Bank Holding Company Act, she said.

Republic National is owned by a Miami-based holding company, Republic Banking Corp. About 70% of the holding company's stock is owned by the Roberto Isaias family of Ecuador, which owns companies around the world, including a large bank in Ecuador. Mr. Bustillo said they constitute foreign owners, not a foreign bank.

However, the Isaias family - several members of which sit on the bank's board - also owns a holding company in the Netherlands Antilles that nominally holds the family's shares of Republic National.

Mr. Bustillo said that entity is not a foreign bank. But Steven Lucas, a lawyer with Winston & Strawn in Washington, said it could still be subject to the foreign bank act.

"I can see where the bank might not feel that way, but I think that FBSEA could still apply here," Mr. Lucas said.

Republic National may be a victim of the caution in dealing with foreign banks that arose primarily in the wake of the Bank of Credit and Commerce International scandal, and last year's Daiwa Bank case, in which a Japanese trader hid massive losses during an 11-year period, some analysts said.

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