Climbing Costs Increased Regulation Make International Banking In Miami More Difficult
Written by Miami Today on August 27, 2009
By Zachary S. Fagenson
Brickell Avenue and Miami won’t lose their status as an international banking hub, but experts say domestic regulation and competition from financial centers in Europe and Latin American won’t let them take the whole pie.
Currently 23 international banks have Brickell Avenue offices, according to Ryan Stokes of the state’s Office of Financial Regulation. But between the early 1980s and today, 47 other international banks have opened and then closed their doors here.
Those 70 banks, headquartered in such countries as Switzerland, Panama and Korea, account for more than half of the 133 international-banking permits the state has issued throughout its history.
While some of the office closings line up with past economic crises, the climbing cost of running an international bank branch in Miami makes opening and running one more difficult.
"From an economic point of view, the Bank Secrecy Act, due-diligence regulations [and] the cost of compliance has created a problem in our banking community," said J. Antonio Villamil, dean of St. Thomas University’s business school and principal of the Washington Economics Group. "Because of the cost of compliance, you need a lot of officers, a lot of expertise — and if anything happens, even with one client, [a bank can] get in real trouble."
Those high costs, he added, have prompted many banks to draw back their international presence and save money by operating from such banking centers as Panama City, Panama; London, or Frankfurt. Additionally, the Sept. 11 tragedy prompted the federal government to enact further legislation strengthening oversight of international money and creating a host of immigration issues.
"The scrutiny regarding immigration and visas has had a major impact" on international banking in Miami, Mr. Villamil said. While it may be for "obvious needs, you talk to a lot of business in people in Latin America they ask, "Why come to Miami when we can go elsewhere?’"
But being a player in international banking in the Western Hemisphere demands some presence in Miami, said Bowman Brown, chairman of Shutts & Bowen LLP’s financial services group.
Canada’s Scotiabank, which has 69,000 employees in about 50 countries across the globe, "just opened an agency [in Miami,]" he pointed out. "That once again reaffirms the importance of Miami as an international private banking center looking toward Latin America.
"If you’re a major international private banking player in Latin America, you need a Miami presence. I think that our position will continue to fill that role for some time," Mr. Brown added.
And while some multinational banks may be still be able to attract Latin American clients without a Miami address, the wealth-management expertise found here, he noted, is an invaluable asset.
"Panama has eroded a bit of our business because [of] its lower compliance costs … [and ease of] getting a visa and dealing with immigration," Mr. Brown said. But "for those international private banking customers looking for world-class money management, Miami is the primary location."
And Kenneth Thomas, a Miami-based independent bank consultant and economist, was skeptical about reading too much into the number of international bank operations here that have closed.
"The number of international banking offices on Brickell is dependent on many factors such as the economy not just in the US [but] also the conditions in the banks’ home country," he wrote in an e-mail. "Despite these ups and downs… Brickell Avenue continues its dominance as the international banking capital of the region."
Mr. Villamil of St. Thomas University, however, said the future of that dominance isn’t necessarily secure.
"You may see a little more trade finance and private banking," he said. "But, in terms of the heyday of international banking, expansion is gone unless [the government] changes the structure of impediments to the growth of" the industry.