Banking and Financial Institutions
Foreign Banks in the United States
Foreign banks are growing competitors of the U.S. domestic banking industry. The numbers clearly indicate that foreign banks are becoming an increasingly important part of the U.S. banking system. Assets held by branches and agencies of foreign banks in the United States have grown substantially over time, from $800 billion at the end of 1991 to $2.5 trillion in the first quarter of 2007. Their share of U.S. banking assets has risen since 2003 to a historical high of 24.1 percent in the first quarter of 2007, well above the previous peak of 22.6 percent in 1991.
A similar pattern is apparent in foreign banking organizations’ market shares of loans and deposits. Their total loan holdings rose to $885 billion, or 14.9 percent, of all loans at the beginning of 2007, after having gone through a trough of 10.9 percent in 2003. The predominant type of asset held in the U.S. branches of foreign banks is commercial and industrial loans. Recent trends suggest that foreign banks remain active in business lending, as the annual growth rate of business loans (nearly 29 percent) mirrors that of growth in total loans over the same period (from the end of 2003 through the first quarter of 2007).
Finally, foreign banking organizations’ 27.6 percent share of deposits confirms that they are important competitors in the United States. Moreover, the growth in deposit share for these organizations suggests that foreign banking companies will remain important competitors in U.S. financial markets.
*Total claims, including domestically owned commercial banks as well as foreign
banks’ branches and agencies in the 50 states and the District of Columbia;
New York investment companies (through September 2006); U.S. commercial
banks, of which more than 25 percent are owned by foreign banks; and international
banking facilities. The data exclude Edge Act and agreement corporations; U.S. banks’ offices in Puerto Rico, the U.S. Virgin Islands, and other affiliated
insular areas; and foreign banks’ offices in U.S.-affiliated insular areas.
a. Excludes commercial banks but includes international banking facilities as well as banks owned by foreign nonbank entities.
b. Adjusted to exclude net claims on their own foreign offices.
Source: Federal Reserve Board, Structure and Share Data for U.S. Offices of Foreign Banks.
Economic Trends is published by the Research Department of the Federal Reserve Bank of Cleveland.
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