A recent survey by the New Jersey banking department found that an "overwhelming majority" of the state's businesses favor changes in legislation that would allow foreign banks to operate there.
According to a survey of 257 businesses in the Garden State, half have done business with foreign banks through offices outside the state. More than 70% of those who had done business with foreign banks favored their admission into New Jersey, the state banking department reported.
The rapid growth of imports and exports, coupled with foreign banks' knowledge of business conditions outside the United States, were among the main reasons for increased relationships with non-U.S. banks, the banking department found.
"This survey confirms what the Department of Banking has stated all along: that there is a demand for foreign banking in the state of New Jersey," said acting commissioner John Traier. "Now is the time to get foreign banks into this state."
New Jersey has barred foreign banks from opening offices in the state since 1948, though some foreign banks, like Britain's National Westminster Bank PLC, have entered the market through U.S. subsidiaries.
Other states impose a host of restrictions and limitations on the ways foreign banks can operate. Some, like Texas, allow foreign banks to open agencies but not branches, while others, like Illinois, permit branches, but not agencies.
State banking authorities in 28 states bar foreign banks from opening either representative offices, agencies, or branches, according to a list compiled by the Conference of State Banking Supervisors. Foreign banks, however, operate in some of those states under federal banking licenses.
Legislation allowing foreign banks into New Jersey is pending before the state Senate. The legislation has been approved by the General Assembly, or lower house of the New Jersey legislature, and is expected to be voted on by the state Senate before the end of the year.
The legislation has the support of both Gov. Christine Todd Whitman and the state banking department.
"It is clear that the presence of foreign banking offices in New Jersey would enable its businesses to capitalize more effectively on the special growth opportunities afforded by exporting and importing," the banking department noted in a statement.
But the New Jersey Bankers Association is opposed to allowing foreign banks to establish branches in the state. Kurt Schaub, a spokesman for the group, said that most large banks established in New Jersey already have large international departments. Foreign banks should only be allowed in if they establish locally capitalized subsidiaries, he added.
According to the banking department survey, more than three-quarters of the companies that use foreign banks used European banks, while banks based in Hong Kong, Korea, Singapore, or Taiwan were used by 7% of the survey respondents. Banks from Japan and Germany were also reported as the most frequently used.
The survey also found that most New Jersey companies establish their borrowing relationships with foreign banks through offices in New York. But these companies also said they used foreign bank offices located in Chicago and Los Angeles.