Entering international banking.

• Author: Breeze, Robert
• Position: Penetrating The Pacific Rim - Editorial

Entering international banking Priming Alaska for International Trade

IN 1981, THE U.S. FEDERAL Reserve Board permitted banking offices located in the United States to establish international banking facilities (IBFs). The purpose was to allow banks and other financial institutions to conduct a deposit and loan business with foreign companies and individuals, including foreign banks, without being subject to reserve requirements or to the interest rate ceilings of the Federal Reserve Board. IBFs also are exempt from insurance coverage and assessments imposed by the Federal Deposit Insurance Corp.

A number of states have encouraged banking institutions to establish IBFs by granting favorable tax treatment under state and local law. The time has come for Alaska to seriously consider creating an international banking facility.

More than 600 banking institutions, including U.S. banks, branches of foreign banks, savings banks, savings and loan associations, and even a number of U.S. and state agencies have established IBFs. More than half of the nation's states - even those as small as Arkansas - permit the facilities. There is no reason why an international banking facility could not be successfully implemented in Alaska.

Under Federal Reserve Board regulations, IBFs can handle virtually every type of international financial transaction. Although regulations restrict the intermixing of domestic and international financial transactions to a significant extent, IBFs may purchase or sell assets such as loans, loan participations, securities, certificates of deposit and bankers' acceptances from or to any domestic or foreign customer.

Where successful IBFs have been formed, they have contributed to employment expansion, generated substantial net-cash inflows from Eurocurrency trading, created counter-trade financing opportunities, diversified existing banking services, and created a substantial increase in expertise in international banking and financing.

Successful IBFs also have had substantial positive impact outside of financial institutions by helping to improve income in the retail sector by attracting highly paid professionals, profits for insurance companies as a result of the increase in premium volume in co-insurance business, profits of local brokerage houses as a result of increased commissions, and local and state government revenues through license fees, ex-patriot taxes and income taxes. Most importantly, however, successful IBFs...