Federal Reserve Board Chairman Alan Greenspan said he opposes making it tougher for foreign financial institutions to do business in the United States as a way to pressure other countries to open their markets to U.S. companies.

Responding to questions from the Senate Banking Committee, Mr. Greenspan said last week that competition from foreign banks has helped make U.S. banks the best in the world.

Mr. Greenspan rejected calls by Treasury Secretary Lloyd Bentsen to require reciprocity from countries whose financial institutions operate in the U.S.

Greater Access Sought

"It would be unwise in our judgment to jeopardize such clear benefits by abandoning our current policy in favor of a policy of reciprocity, even if the latter might potentially add to pressure on other countries to open their own markets further," Mr. Greenspan said.

Administration officials have stepped up demands that foreign countries grant U.S. banks greater access to their markets. Speaking to foreign bankers at a recent meeting in New York of the Institute of International Bankers, Jeffrey R. Shafer, assistant Treasury secretary for international affairs, said foreign banks should help U.S. financial institutions gain greater access to banking markets outside the U.S.

|Unnecessary Barriers'

"Our firms are sometimes denied access or face unnecessary barriers in competing abroad, Mr. Shafer said.

He added this has led to a situation where some foreign banks become "free riders," enjoying the benefits of access to the U.S. market, while remaining insulated from foreign competition at home.

The New York-based institute represents foreign banks in the U.S. and has approximately 220 banks with U.S. offices as members.

Foreign Banks Burgeon Here

Institute officials said they support the administration's quest for greater market access. But they also noted that U.S. banks can engage in a wide range of activities abroad that they are barred from pursuing in the United States.

"We firmly support open markets but also want to emphasize that American banks have full opportunities in most countries, including the right to do insurance and securities. a right they don't have at home," said Lawrence Uhlick, executive director and general counsel of the institute.

Foreign banks have expanded rapidly in the United States in recent years and now have nearly 700 foreign bank offices representing 300 banks from 61 countries.

Assets Have Quadrupled

According to figures supplied by the Treasury, foreign banking assets have quadrupled since 1980 and foreign banks' market share has nearly doubled to more than 20% of all U.S. banking assets.

In addition, U.S. business loans held by foreign banks now account for more than one-third of the U.S. market.

In New York and California, they represent more than half of all business loans.

Mr. Shafer stressed that the administration welcomes foreign financial firms' activities in the U.S. market and noted that foreign banks have brought extensive benefits to U.S. consumers and businesses.

Major Provider of Jobs

Among these, he listed technologies and products that foreign banks have introduced. Competition from foreign banks has helped produce lower interest rates for domestic borrowers.

He also noted that foreign banks provide some 200,000 jobs, add more than $11 billion to the U.S. gross domestic product, and facilitate U.S. participation in foreign trade and investment.

But Mr. Shafer also warned that access to foreign markets for U.S. financial firms remains a key goal.

"Our objective in the present Uruguay Round negotiations is to open financial markets abroad to U.S. firms, just as foreign financial firms have access to our markets," Mr. Shafer said.

"This |market-access activism,' as some have called it, is consistent with the President's statement that the U.S. must |compete, not retreat'."

The U.S. has recently increased pressure on countries like South Korea to open their banking markets and is also engaged in bilateral discussions with other Asian as well as European and Latin America countries in an effort to improve market access for U.S. financial firms.

However, progress in talks with some countries, like Japan, "has slowed in recent years," Mr. Shafer noted.

The official said the administration is renewing efforts to help U.S. financial institutions gain greater access to underwriting, asset management, cross-border operations and insurance in Japan.

"The bottom line is that U.S. markets are open to to foreign financial firms," Mr. Shafer said. "We expect foreign financial markets to be open to our financial firms."

Mr. Shafer emphasized that foreign banks have a vital stake in ensuring that current negotiations are successful.

"You have an interest in helping to make trade in financial services a two-way street," the official urged foreign bankers.

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