Magazine article American Banker

Sanctions on India, Pakistan May Hurt U.S. Banks Abroad

Magazine article American Banker

Sanctions on India, Pakistan May Hurt U.S. Banks Abroad

Article excerpt

U.S. sanctions against Pakistan and India could curtail U.S. banks' efforts to develop operations in those countries and in other emerging markets, industry sources warned.

"Emerging markets have become radioactive for U.S. banks," said Gary Kleiman, president of Kleiman International Consultants Inc., a Washington financial advisory firm.

Mr. Kleiman said that if the United States continues to slap economic sanctions on developing countries for nuclear testing or other reasons, U.S. banking companies will find it increasingly difficult to expand in those markets.

A U.S. government interagency committee that includes the Treasury Department and the Department of Commerce is drafting details of the sanctions that are to be imposed on India and Pakistan for their recent nuclear bomb tests.

Sources said the guidelines for banks and other U.S. corporations are to be released shortly. The sanctions are being imposed under the 1994 Nuclear Proliferation Prevention Act.

The threat of sanctions, coupled with measures adopted by Pakistan to freeze $13 billion of foreign currency accounts, prompted Standard & Poor's last week to cut its sovereign credit rating on the country to B-minus. The rating agency noted that sanctions could severely curtail Pakistan's access to foreign currency and financial assistance from multilateral lending agencies such as the World Bank.

Duff & Phelps Credit Rating Co. also moved to downgrade India last week, changing its outlook for the country to negative from stable. …

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