It wasn't too long ago that U.S.-based subsidiaries of foreign banks were handily winning market share from their U.S.-owned counterparts--particularly in providing commercial and industrial loans to American businesses. But now, as economist Gary Schlossberg at Wells Fargo Bank notes, the pendulum is swinging in the other direction.
While personal loans and C&I loans on the books of U.S. banks are now rising, ongoing declines at foreign-owned institutions cut their share of total bank lending to a little above 17% at the end of last year from close to 19% a year earlier, the first decline since 1984 and the lowest reading in five years. At the same time, the foreign banks' share of C&i loans, which had jumped from 22.5% in 1985 to 29.4% in 1989 and 35.6% in 1992, fell to under 34%.
Why have foreign-owned banks pulled in their horns? Recessions at home, sour U.S. real estate loans, a decline in syndicated C&I loans, and a tougher regulatory environment all played a part, says Schlossberg. The big question for potential U.S. borrowers, however, may be whether the foreign banks will be as willing to lend when credit tightens again as they were during the credit squeeze of the early 1990s.