Search

A study was conducted on the marketing schemes of foreign banks operating in the US in relation to changes in the US financial markets. US banking sector data for the period 1973-1992 were analyzed. Results showed that foreign banks reduced lending in 1992, almost a year after US banks started reducing lending. It was also observed that both US and foreign banks reduced credit for other financial institutions as a share of total loans. Data further revealed that foreign banks increased business loans as a share of total loans, as opposed to the reductions undertaken by US banks.

The Third World debt crisis resulted in the suspension of interest payments by countries who felt they could no longer service such arrangements with creditor nations. A restructuring of debt has attempted to alleviate the problem. However, some debtor nations continue to fall into payments arrears by making foreign exchange reserves unavailable. The amount of interest arrears for debtor nations jumped from $8.8 billion in 1985 to roughly $53.1 billion in 1992. The rise is attributed to a decreased debt burden coupled with growing annual deficits, as well as a growth in foreign exchange reserves.

The number of foreign banks with branches in the U.S. has grown considerably since the 1970s. This article focuses on what the presence of these branches and agencies means to domestic institutions in terms of competition, lending activities, and geographic location, among other things. It also touches on the significance of the International Banking Act (IBA) of 1978 to these banks. (Reprinted by permission of the publisher.)