Spurred by rapid economic growth at home and hopes for increased trade with the United States, Latin American investors are showing renewed interest in buying community banks in Florida.
However, regulatory obstacles in the wake of the Bank of Credit and Commerce International scandal are making the application process more difficult.
The Florida Department of Banking and Finance Banking Department has two applications from Latin American investors pending. Two directors of Banco del Pichincha in Quito, Ecuador, applied in Aprtil to purchase Miami-based Gulf Bank, which has $26 million in assets.
In September, a Venezuelan investor petitioned to buy $60 million-asset Westchester Bank, also in the Miami area.
Ecuadorans to Buy Grovegate
And Grovegate Bank, Miami, with $15 million in assets, in on the verge of being sold to five Ecuadoran brothers, pending final regulatory approval.
Miami National Bank, with $50 million in assets, was taken over by federal regulators in January and later sold to Miami-based Commercebank, which is controlled by Venezuela's Banco Mercantil.
Lawyers and consultants working with potential investors say groups from Brazil, Costa Rica, Ecuador, Guatemala, Peru, and Venezuela have been scoping out prospects.
Florida's Banking Department lists 24-state-chartered and federally chartered banks that are owned by foreign individuals or corporations, 15 by Latin American interests.
Despite all the activity, regulatory concerns sparked by the BCCI scandal are lengthening the application process to two years or more. U.S. authorities are demanding more extensive background checks.
Atlanta consultant T. Stephen Johnson, who has been trying to help a Brazilian group obtain a charter in Florida, said the background checks took a year and three months.
Changes in the Rules
Ownership rules have also been revised. Because Luxembourg-based BCCI had abused privileges afforded to its Caribbean unit, the Fed now forbids foreign investors from including an offshore entity in the ownership structure, thus eliminating attractive tax benefits.
"In informal discussions with the regulatory authorities, we've basically been told that any application presented with that type of structure is simply not going to be approved," said Alcides Avila, a Miami lawyer.
The issue, which emerged this year, became one of the reasons a consortium of Venezuelan companies withdrew its application in late November to acquire Eagle National Bank of Miami.
Once Stung, Twice Shy
"We are looking more closely at the applications, and BCCI is a factor," said Federal Reserve spokesman Joseph R. Coyne in Washington. "When you get stung by something like BCCI, you tend to take a closer look at these things."
Despite the heightened scrutiny, "the interest is remaining strong, perhaps increasing, on the part of Latin Americans," said Bowman Brown, a Miami attorney who works with foreign investor groups.
The attraction is clearly related to the economic liberalization sweeping the region. Countries from Argentina to Mexico are junking statist economic controls in favor of privatization.
With industries returning to private hands and currencies freed from exchange controls, Latin American businessmen are better able to deploy their capital overseas.
In addition, the promise of free trade agreements, such as the one now being discussed by the United States, Canada, and Mexico, has caused Latin investors to consider buying Florida banks as a way to participate in financing the expected new surge of trade.
Having a U.S. presence allows a Latin American bank to have a foot in both camps in country-to-country trade financing, said Saturnio E. Lucio, an attorney with Weil, Lucio, Mandler, Broland & Stele in Miami.
Many of the investors applying for Florida bank charters are owners or directors of Latin American banks. They tend to make the applications in their own names to avoid restrictions on the amount of capital they can place in their U.S. investment.
Some Latin American countries limit the capital their banks can deploy overseas.
In general, the Florida banks targeted by foreign investors fit into the "troubled" category, so the U.S. owners are happy to sell.
Sick Banks for Sale
Even though Latin Americans are eager to rescue these banks, lawyers working these groups complain that the tight scrutiny favors investors from countries with more developed regulatory systems.
"If you're not a major wealthy individual or group of individuals, preferably European, your chances of buying your way into the banking market is very difficult," Mr. Lucio said.
But the Latin investors keep trying. "As difficult as it is, they still feel it's important to be here," Mr. Avila said. "They view the U.S. as an attractive environment in terms of protecting stockholder equity and providing a stable economy."