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Jobs in Miami’s international banking sector decreased for the fourth straight year in 2003, but industry veterans aren’t giving up on South Florida. International bankers admit many jobs have been lost because of global consolidation and increased compliance costs related to the USA Patriot Act. But they say that the industry is evolving rather than withering away. “The problem is mergers and acquisitions, consolidation and re-engineering,” said international banking attorney Clemente Vazquez-Bello, a partner with Gunster Yoakley & Stewart in Miami. “It has to do with globalization, and the fact that some banks are buying other banks and they are merging, or they are consolidating operations on a worldwide basis.” Vasquez-Bello and others also point to a provision under the 1999 Gramm-Leach-Bliley Act that is prompting some foreign agencies to shift assets and employees to newly opened U.S. brokerage firms. Employment statistics for the broker-dealers are not as readily available as they are for international banks, bankers said, and so growth there cannot be quantified. What’s known is that the industry lost 161 international banking positions last year, following the elimination of 370 positions in 2002, 216 in 2001 and 64 in 2000. The latest job drop has dragged the industry’s total employment to 972. That’s about half of the industry’s peak of 1,783 jobs in 1999. Today, many former international bankers still in Miami work for domestic banks or have switched industries altogether, bankers said. Office space formerly occupied by foreign agencies is vacant or has been subleased to other institutions. For example, Mellon United Bank’s name now lights the Brickell Avenue office building that opened in 2000 as the Barclays Financial Center to recognize the British bank as the tower’s largest tenant. Barclays retreated from Miami in 2002. International bankers remain confident that the sector will not disappear because of Miami’s vital location at the financial crossroads for business between fully developed nations and those in Latin America. But it’s unclear how a delay in the decadelong effort to create a 34-nation Free Trade Area of the Americas pact might affect the local international banking scene. Local banking, business and civic leaders had thought a hemispheric agreement would bolster the need for businesses to put operations in Miami. “Miami is the financial gateway to Latin America,” said Vazquez-Bello, who is also general counsel of the Miami-based Florida International Bankers Association. “If you are a bank in Europe that wants to go toward Latin America, I think it makes more sense to have an office here than to have an office in New York. If you are a bank in Santiago, Chile, and you want to have an international presence worldwide, why go all the way up to New York?” Under the 1978 Florida International Banking Act, foreign agencies may accept deposits from non-U.S. residents and companies and may lend to anyone. Deposits are usually in U.S. dollars but are not insured by the Federal Deposit Insurance Corp. The law made Florida, and Miami in particular, an alternative to New York for foreign banks targeting Latin America and the Caribbean. Florida’s international banking industry benefited for two decades until a series of events reversed its fortunes. Brazil, Latin America’s largest country, devalued its currency in 1999, succumbing to the global economic crisis that devastated Asia and Russia in the preceding years. Brazil’s financial problems cast doubt on the financial condition of neighboring countries, including Argentina. Florida took a second blow with the Gramm-Leach-Bliley Act that includes a soon-to-be implemented “push-out” provision that takes effect in November. This provision requires banks to shift responsibilities for U.S. equities to broker-dealer firms regulated by the SEC. Foreign agencies would no longer be allowed to act as a middleman in Miami for international clients who wanted to trade U.S. equities. “There were a lot of operations that had a significant part of their business in the personal banking business, not just the deposit taking but the securities part,” Vazquez-Bello said. “Now some of the foreign banks that have a presence here have basically reduced significantly their agencies or closed them.” Germany’s Dresdner Bank Lateinamerika, one of the largest foreign agencies in Miami, made changes ahead of time. It converted to a broker dealer in May 2002 by acquiring Coral Gables-based Vestrust Securities and becoming Dresdner Lateinamerika Financial Advisors. The acquisition made sense in that Dresdner specialized in serving wealthy individuals while Vestrust concentrated on institutional investors. Dresdner also obtained Vestrust’s third-party custodial clearing agreement with Bear Sterns & Co. This allowed Dresdner to drop its European custodial system in favor of a firm in the same time zone, which made operations more efficient, said Dresdner’s Miami chief executive Jacobo Gadala-Maria Jr., who was the former president of Vestrust. Dresdner Lateinamerika Financial Advisors kept Vestrust’s 25 employees after the acquisition and retained 45 of the foreign agency’s 155 Miami staffers. “The rest received a generous package,” said Gadala-Maria, who relocated into about one-third of the foreign agency’s office space at 801 Brickell Ave. “To the best of my knowledge, most if not all Dresdner employees who left are now gainfully employed in Miami.” The final blow for Florida’s international banking industry came with the passage of the USA Patriot Act after the Sept. 11 terrorist attacks. The act establishes stringent financial reporting requirements and information sharing provisions designed to help the government track money launders. The triple whammy is taking a toll on international bank financials. Assets totaled $14.8 billion in 2003, up 5 percent from $14.1 billion in 2002 but down dramatically from $21.7 billion in 2001. Loans dropped to $3.6 billion last year from $4.1 billion in 2002 and $11.6 billion in 2001. And deposits remained flat for the third year in a row, at $13.3 billion versus $13.0 billion in 2002 and $13.1 billion in 2001, according to the statistics. Banque Audi (Suisse) of Geneva opted to close last year and protect its clients’ privacy rather than comply with the Patriot Act’s requirement to make client information available to U.S. examiners. Other foreign banks have opted to close or sell because the compliance costs are too steep while the profits are too limited. “Some institutions don’t want to make the investments that are necessary to comply with all of the requirements,” said Seno Bril, Miami general manager of France’s BNP Paribas foreign agency. BNP Paribas maintains a growing foreign agency, and has also created its own broker-dealer to serve clients. Bril said Latin America is a growth market, but remains an underdeveloped region economically. “The wealth creation in [the Latin American] markets is still not there where we would like to see it,” he said. This has made the region expendable for many institutions that closed their Miami offices to concentrate on wealthier regions. Others still serve Latin America, but from a New York office. Some remaining foreign agencies that have large enough banking networks are filling the void created by the departing banks, said Alfredo Montero, Miami general manager of Banco de Credito del Peru. Banco de Credito del Peru moved from New York to Miami in 2002. At the time, it assumed the license and employees of its sister company, Atlantic Security Bank of the Cayman Islands. Montero grew the Miami office by four staffers to 27 in 2003, and he said he could add others if business continues to grow. He is developing relationships with companies and wealthy individuals in select markets such as Brazil and Central America. The Peru-based bank is on the verge of turning a profit in its third year. The foreign agency reported a net loss of $36,000 in 2003, less than half of the $83,000 loss it experienced in 2002, according to state banking statistics. “We have found as certain big banks have moved out of the area, it has left opportunities for smaller banks like ours to move in,” Montero said.

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