WASHINGTON - A trade group for foreign institutions released a study Thursday that may provide ammunition for lawmakers who want to permit banks to underwrite securities with few restrictions.
The Institute of International Bankers found that virtually all of the world's major nations permit securities underwriting within the bank itself, rather than through separately capitalized affiliates.
By contast, U.S. banks are allowed to underwrite stocks and bonds only through separate holding company affiliates, and even those transactions are subject to strict limits set by the Federal Reserve Board. For example, those transactions cannot account for more than 10% of the unit's total revenues.
"This is powerful evidence that Congress can permit banks to engage in securities underwriting without extensive firewalls," said the institute's executive director, Lawrence R. Uhlick.
The institute reported that just four of 46 countries surveyed - Japan, Korea, Singapore and the United States - both require banks to maintain separate underwriting units and impose firewalls regulating the relationship between the two.
However, Mr. Uhlick noted that U.S. banks operate abroad in the same unrestricted environment as foreign institutions.
"We talk so earnestly about whether we need firewalls in the U.S., but they don't apply to international operations," Mr. Uhlick said. "J.P. Morgan has firewalls here, but in London it has none of those restrictions."
Mr. Uhlick said the House Banking Committee is moving in the right direction by passing legislation that would repeal the Glass-Steagall Act.
The banking committee bill would impose few firewalls, he said. More important, it would give the Federal Reserve Board flexibility in applying those restrictions, a step Mr. Uhlick said his members would support.
Mr. Uhlick said the Fed has shown itself lately to be in favor of easing firewalls.
The findings about firewalls were included in the institute's eighth annual international survey of developments in banking, securities, and insurance.
The report also found evidence that a second key trend - increased global coordination of regulatory and supervisory initiatives - is continuing.
In addition, the report found that the United States is the only nation that imposes geographic restrictions on banks. However, both U.S. banks and foreign banks with operations here will be able to branch interstate after June 1, 1997, except in those states that opt out of the new law.
