Vanderbilt Journal of Transnational Law

First Page



In recent years foreign banking associations have played an increasingly important role in the United States money market. While foreign banks have been operating in the United States since the 1870's, no substantial foreign banking existed in this country until the early 1970's. Since that time, however, there has been rapid expansion, and by 1978 there were 210 foreign bank facilities controlling $66 billion in assets in the United States. Most of this activity is confined to New York, Illinois, and California.

New York alone accounts for three quarters of all foreign bank assets in this country. Although this concentration may be due in part to exclusionary banking laws in a number of states, New York City's preeminence as a world money center coupled with the worldwide expansion in international trade has made New York attractive to foreign banks. A New York affiliate accords its foreign parent access to international money markets after the parent's home office has closed for the day, permits daily settlement of its parent's United States dollar transfers, and provides its parent liquidity in times of tight credit and loan generation in times of surplus funds. A New York office also enables a foreign bank to engage in arbitrage and other operations associated with the shift of Eurodollars to New York. In addition to activities related to money market operations, a New York presence allows a foreign banking corporation access to United States securities markets and affords the entity a better opportunity to provide banking services to the United States affiliates of the bank's foreign clients. Access to securities markets includes the facilitation of contact with institutional investors, the provision of investment advisory services, and the ability to make call loans to dealers. The latter contemplates not only traditional banking services, but includes assistance with business contacts and information concerning the United States market.

While the advantages of a New York presence are numerous, the process involved in obtaining a license is complex. Much of the process extends beyond the terse requisites of the applicable statutes and administrative regulations to the informal customs and practices of the New York Banking Department.

It is the purpose of this note to disentangle some of the complexity and to provide a working guideline for an attorney faced with the preparation of an agency or branch license application. Before proceeding to a discussion of the application process, however, it is appropriate to review the various forms through which a foreign banking corporation may enter the New York market and to examine certain aspects of the New York bank regulatory scheme which affect the application process and the early operation of a New York agency or branch.