Banking: Pin-Stripe Invaders

The ads in San Francisco newspapers last week introduced “Miss Lizbeth Rotherwick of Telegraph Hill. Has Hester Bateman silver. Collects old Spode. Enjoys pullovers by Pringle. And now she has a special checking account at the Chartered Bank of London.” The mythical miss sounds somewhat less than smashing, but the point of the ads was that she did not have to cross a continent and an ocean to open a checking account at Chartered: the London bank recently opened a San Francisco subsidiary. Aware that the U.S. money market can be a happy hunting ground, foreign banks are setting up branches in the U.S. in increasing numbers.

Four dozen foreign banking branches and offices now do business from Washington state to the Virgin Islands, the great majority of them in New York and California. Osaka’s Sumitomo Bank opened its sixth California branch last year, and the Bank of Tokyo of California recently started its eighth and ninth branches. In Manhattan, the international banking center, the British have opened four major branches, the Swiss three, the French and Israelis two each, and the Italians, Dutch, Lebanese and Pakistanis one apiece. Last month Brazil’s Banco da Lavoura de Minas Gerais opened up in Manhattan, and last week the Bank of Tokyo Trust Co. opened newly expanded offices as kimono-clad Japanese girls served raw fish and Suntory whisky to customers.

The foreign branches work primarily to promote and finance U.S. trade with their home countries. They issue letters of credit, handle trading in foreign securities, assist tycoons and tourists from abroad, arrange dollar loans for foreign companies and foreign-currency loans for U.S. firms with subsidiaries abroad. Some states, notably New York and California, also permit them to do a “retail” business with small local customers. The foreign banks often make adventuresome loans that U.S. banks turn down and fatten their reserves by accepting U.S. deposits, mostly from immigrants with sentimental ties to the old country. They also have some novel ways of attracting U.S. customers. The Manhattan branch of the Israel Discount Bank, for example, offers its own version of the Christmas Club for savings—a Chanukah Club, tied to the Jewish Feast of Lights.