Magazine article American Banker

Trade Pact Eases Restrictions on U.S. Banks in 70 Countries

Magazine article American Banker

Trade Pact Eases Restrictions on U.S. Banks in 70 Countries

Article excerpt

Multinational banks based in the United States can expect to have an easier time entering foreign markets under an agreement reached by the World Trade Organization.

Citicorp, Chase Manhattan Corp., BankAmerica Corp., and State Street Corp. are expected to be among the companies that benefit most from the accord, which was concluded over the weekend.

U.S. institutions could have banking, securities, and insurance businesses in more than 70 countries that previously restricted outside ownership.

"This gives U.S. banks options they didn't have before," said Chase executive vice president John R. Price. "The door is open in a way it wasn't before."

"This is good, this is welcome, and this introduces a whole new efficiency into the financial system," said Stan W. Shelton, executive vice president of State Street Bank and Trust Co., Boston. "It opens up a new capability for banking organizations to acquire other ones, which has been very difficult in some countries."

Though the U.S. and major industrialized countries place few restrictions on foreign entry, other governments have been less accommodating.

Under the new pact, another 59 countries agreed to allow foreign companies to own bank branches and subsidiaries within their borders.

The agreement also covers insurance, with 52 more countries guaranteeing broad access to their markets, and 44 permitting 100% foreign ownership of securities subsidiaries.

"This agreement levels the playing field in global financial markets, providing new opportunities for U.S. financial services firms," Treasury Secretary Robert E. Rubin said in a prepared statement Saturday.

The Senate has until Jan. 29, 1999, to ratify the agreement. Congressional sources said it may take the matter up this spring. House Banking Committee Chairman Jim Leach supported the deal; a spokesman for Senate Banking Committee Chairman Alfonse M. D'Amato declined to comment.

Several bankers warned that the pact is only a first step toward a free market.

"The officials that represent these emerging markets have to go back to their countries and pass enabling legislation, and that isn't always a cakewalk," said Darin Narayana, president and chief executive officer of Banc One International Corp., Dallas.

The pact is expected to open markets that U. …

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