Hedge funds fuel international banks
Written by Scott Blake on July 9, 2014
Despite stricter banking regulations, there’s enough money in Miami to maintain its status as the biggest international banking center south of New York City, according to the new head of the Florida International Bankers Association.
“We have a lot of hedge fund money, private family money, venture capital money…,” said newly elected association President Roberto Muñoz, also South Florida market president for BBVA Compass Bank in Miami.
He noted that the association’s member banks are active in correspondent banking, trade finance and international wealth management/private banking services.
The construction boom in downtown Miami is indicative of opportunities for international banking here, Mr. Muñoz said, with the next wave of foreign banks likely to come from China once enlargement of the Panama Canal opens up Pacific-Atlantic sea trade routes.
“There have been no Asian banks in Miami,” he added, since mostly Japanese banks pulled out about 15 years ago following the East Asian financial crisis.
Still, a big concern for the international bankers association is the Basel III international accord, which will set higher standards for bank capital levels.
That and US regulations such the Foreign Account Tax Compliance Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act will increase the cost of doing business in the US for overseas banks.
In February, for example, the Federal Reserve approved new rules subjecting large foreign lenders with US operations to the Fed’s requirements on capital, debt levels and annual “stress tests.”
Under the rules, foreign banks with US assets greater than $50 billion would have to maintain more loss-absorbing capital than some other countries require, which could force them to transfer billions of dollars in capital to the US, the Wall Street Journal reported.
The rules would most affect foreign banks with large operations on Wall Street such as Deutsche Bank, Barclays, Credit Suisse Group and UBS AG. The change was required by the 2010 Dodd-Frank law, aimed at better protecting the global financial system by ensuring that large banks are adequately measuring and protecting against risk.
Even so, Mr. Muñoz said, Miami banks as a whole now have relatively strong capital levels, as many poorly capitalized banks have been “weeded out” from the market following the US recession and financial crisis of 2008 and 2009.
Also, new federal banking regulations requiring more tax transparency in the US and abroad are effectively global, as the US has signed treaties with many overseas governments agreeing to abide by the same rules in exchange for receiving information about foreign accountholders in the US.
As a result, Mr. Muñoz said, Miami banks – long a preferred safe haven for foreign capital – haven’t been losing much business, because foreign customers here now largely face the same reporting rules in their home countries and elsewhere.
However, he added, the US still holds a key advantage for foreigners to keep their money here: the security of our banking system.
“The recent crises in the world have raised the value of the US Treasury” in terms of stability, he explained. “People flock to us.”
Increased foreign investment in Miami from Brazil still continues, among healthy levels from a host of other nations. If South Florida were viewed as country, he added, the region’s economy would be tied with Hong Kong for 40th place worldwide, based on gross domestic product – the output of all goods and services.
“I don’t see a flight of money” out of South Florida due to increased banking regulations. “There’s still money coming in,” Mr. Muñoz said. “We see it [locally] in real estate and the economy. The reason is we offer safety.”