And now the banks: Japanese make US inroads
| New York
Citicorp applied for another branch in Tokyo way back in 1953. The huge New York bank has yet to receive a response from the Japanese government. At the same time, in this country, Japanese banks are expanding faster than their US counterparts.
This story is familiar. In both electronics and autos, the Japanese have maintained steady growth in this country while protecting their own markets at home. This time, however, they are striking at the heart of the US financial system: the banking world.
The Japanese, led by such banks as Bank of Tokyo, Dai Ichi Kangyo Bank Lt., Mitsui Bank Ltd., and Sumitomo Bank Ltd., are beating banks such as Citibank, Chase Manhattan, and Bank of America to the punch in making loans to US corporations. Foreign banks as a whole now have booked over 12 percent of the commercial and industrial loans made to corporations in the United States. And a large portion --about 38 percent -- have been booked by the branches or agencies of Japanese banks.
According to a recent study made by the American Banker, a banking newspaper, four out of five of the largest foreign bank lenders in the US are Japanese. The largest, the Bank of Tokyo Ltd., had almost $2 billion in loans outstanding at its six branches and agencies, and, with its $9 billion in assets, would be as large as the nation's 22nd-largest bank.
At the same time, according to David Rockefeller, the chairman of Chase Manhattan Bank, the business of US banks in Japan is relatively stagnant. Mr. Rockefeller, at a recent dinner, told a table full of reporters, "We don't want restrictions on the Japanese, but we want the Japanese to treat US banks more generously." He complained that the Japanese have limited the availability of yen in Japan for US corporations to make loans in Japan. And when he has traveled to Japan, Mr. Rockefeller says, "I've been politely received by bank officials who say, 'We understand your problem,' but nothing gets done about it."
Leland S. Prussia, vice-chairman and head of the world banking division of the Bank of America, says he too has made frequent visits to Japan and "received a sympathetic hearing." Like Mr. Rockefeller, Mr. Prussia wants to see the Japanese restrictions eased. "We'd like to expand in Japan," he says.
So would a lot of other US bankers. Take Citicorp, for example. Edward L. Palmer, chairman of the executive committee, says that when the bank has mentioned to the government its application for another Tokyo branch, it only gets "a big smile and a laugh."
STill, he notes, Citicorp has been more successful than most banks at developing business in Japan and probably has one of the largest shares of the market there. The key, he claims, was convincing Japanese businessmen that they could borrow money based on their cash flow. Traditional Japanese business has relied on "guarantees" from Japanese banks when borrowing money from foreign lenders. "There was a cultural problem, but we have solved that one," Mr. Palmer says.
For the most part, however, foreign banking in Japan is small. Foreign banks represent only 2 percent of all the bank loans and less than 1 percent of all the bank deposits. Although there are some 64 foreign banks in Japan, and they can have the same lines of business as ordinary Japanese banks, they mainly stick to foreign exchange and trade financing.
A recent report by Toshio Yamazaki, vice-president of Merrill Lynch International, states that foreign banks' importance "is expected to increase," although he admits "there growth has been somewhat hindered to date by their limited local funding ability."
A Japanese journalist, Soshichi Miyashi of Nihon Keizai Shimbun, one of Japan's leading business publications, agrees with Mr. Rockefeller that some liberation is in order. "It's my personal opinion the Bank of Japan should liberalize more," he states.
The Bank of Japan's representative office, reached in New York, had no comment.
The US banks' eagerness to expand their banking relationships in Japan, in fact, recently got them into some stickly business. A group of 20 foreign banks made loans totaling $210 million to two companies that used the money to speculate in the stock market. When the stock market fell sharply, the companies filed for bankruptcy.
What particularly irks the US bankers is that they were "introduced" to the companies by Japanese banks. The US bankers felt that an introduction was skin to a guarantee. However, one Japanese banker was quoted as saying, "If the foreign banks pursue this too much it will make it tougher for them to do business here." He indicated Japanese banks would restrict their dealings with the foreign banks.
As is stands, it is very difficult for the US companies to do business in Japan anyway. Japanese companies maintain extremely close relationships with their bankers. One US banker calls it a "family type" relationship. This has been fostered by the weakness of the capital markets and a high rate of growth. At the same time, the importance of the banks has allowed the authorities to exert a central control over the financial system.
Regulation of the banks is very strict with the Ministry of Finance providing a tough system of "guidance." Banks are required to file more financial information with the ministry than US banks have to file. However, they are required to give less information to the public than in the US.
For Japanese banks in the US, doing business here has not been that difficult. Until recently, in fact, foreign banks were not subject to the same reserve requirements as domestic banks -- giving them an advantage. Recent legislation, however, has closed these gaps. Still, Mr. Palmer of Citicorp says the foreign banks have an edge because their multistate banking holdings have been grandfathered into the new law.
For Japanese also gain because they are aggresive. One US corporation reports that it made a complicated loan agreement with a Japanese bank on much better terms than it could get with any US bank.
A corporate officer involved with the treasury function of his company says Japanese bankers will not take "no" for an answer. "If you tell them you have no business from them," he says, "they call back in a month. Now, other foreign banks, especially the Swiss, are catching on."