A section of Miami Beach. - Rosemary Parkinson/Gleaner Writer
MIAMI (AP):
The sparkling glass towers rising above the Atlantic along Brickell Avenue have long been the place where Latin America's wealthy parked their money during political crises and invested it when times were good. These days, economies across Latin America are rebounding, but many in Miami's financial hub aren't seeing the expected boom.
International banking leaders say that post-September 11 security regulations have scared off some clients with clean money who, despite their proximity and attraction to the U.S., are increasingly making deposits in Panama or even Luxembourg. And they say the cost of following the regulations is too great for many smaller banks.
Client Base
Guillermo Rossel, a senior vice- president with International Bank of Miami, said that before 2001, the bank's international clients came from across Latin America. Now they come only from Central America and the Caribbean.
"We are losing international business, both private wealth management and correspondent - bank-to-bank business," said Rossel, whose institution is one of a number of banks with charters in Florida that hold less than $1 billion in assets.
"The regulations have to do with not only knowing our customers but knowing our customers' customers," he said of the bank-to-bank side. "It's become too risky and too costly for us."
The total amount of money flowing to and from Latin America into banks and related agencies in the U.S. is difficult to decipher as state and federal regulators don't break out those numbers, but a few statistics suggest the industry is indeed changing.
Between 2000 and 2005, jobs in international banking in Florida dropped from nearly 5,000 to about 3,000. During the same time, the industry saw a $2.1 billion loss in business revenue, according to a recent study by Florida International Bankers Association.
Meanwhile, the amount of money held by foreign banks with agencies licensed by the state held steady at about $19.5 billion, reversing a growth trend, according to the Florida Office of Financial Regulation.
The number of Edge Act banks - banks allowed only to deal with foreign commerce - dropped from 10 in 2000 to seven in 2005.
Some analysts say the issue is more complicated. The number of banks with foreign offices was already on the decline from its height in the mid-1990s. They ascribe the loss to improved technology that allows companies to provide more services from a central hub such as New York. And they say banking is hardly the only industry where smaller businesses are struggling against global consolidation.
Patriot Act's role
Yet, Seno Bril, CEO of BNP Paribas in Miami, maintains the post-September 11 Patriot Act regulations have played a significant role, especially when it comes to Latin America's wealthy.
Banks must verify the identification of potential clients depositing US$1 million or more, as well as determine the source of funds and purpose of the account. Special diligence must be conducted to identify and monitor accounts opened by foreign government officials, their family members, associates and corporations formed to benefit them.
"These are the people who like to do their shopping in Miami and in the United States. They send their kids to school in the U.S. They come for medical check-ups in the U.S," said Bril, a former head of the Florida International Bankers Association.
Yet they aren't banking as frequently here because of concerns about confidentiality and the "perception that their money is not welcome," he said.
Several banks from Spain have opened offices in Florida in recent years, though they tend to focus on existing Latin American customers and the U.S. Hispanic market.
Florida International University Professor Jerry Harr acknowledged that the Sept. 11 regulations have had a chilling effect, but he said new-found political and economic stability are also affecting the amount of capital flowing in from Latin America. Countries such as Mexico and Chile already have the coveted investment-grade status for government bonds, other countries such as Brazil aren't far behind.
With more liquidity at home and more confidence in banking regulations there, companies needn't rely on banks in the United States for short-term transactions, he said.
Clients are also looking for more sophisticated ways to hold their money, such as mutual funds. And with the recent real estate boom, many have put their money into land.
"I have no patience for depositors who complain the Patriot Act is the number one reason for the decline. It's one of the reasons," Harr said.
Still, Bril said people want a friendly face, and they still need dollars, so if Latin Americans are going to bank in the U.S., Florida should be the logical spot.
Bril said he supports the tighter restrictions, but he wants to see the U.S. push to have them implemented world-wide.
"You want to look at the effect. If the only result of the controls is that the money goes somewhere else, then we don't think that's the intention of the laws," he said.
