International banking by local banks in the Washington area has grown substantially in the past five years. What began -- and continues -- as a service for embassies here has expanded into offices and loans to governments and industries around the globe as well as the financing of imports and exports in their own backyard.

More of the lending is concentrated in Latin America than any other continent. Three District banks, led by Riggs, plus Maryland National Bank in Baltimore dominate the field. The foreign assets of these banks now amount to something over $2 billion.

The exact amount is difficult to calculate because banks habitually do not break out their international statistics in mid-year, or if they do so internally, they do not reveal them publicly.The reasons for secrecy given by banks range from protecting clients' privacy to the fear of competitors learning about operations to community and stockholder sensitivity.

The first reason is traditional but the second is largely specious, the head of one international division here admitted, because the major Washington lenders often participate in joint loans. Stockholders have been known to sell their shares when it is revealed that certain banks or companies invest in South Africa, for instance.

In Washington the main reason seems to be the banks' apprehension that they will be accused of concentrating on international business instead of investing in the community, that they will take Americans' money and lend it to foreigners. Bankers emphasize this is not the case, that foreign operations are largely dependent on Euro-dollars, that is, American dollars already held outside this country.

Moreover, determining the amount of international banking activity here is complicated by different methods of calculation. Usually "foreign" refers to a client's overseas domicile, but the business may be conducted in the United States or abroad. Foreign assets generally include advances to other banks and acceptances as well as loans.

Measured in this way, the foreign assets of some of New York's largest banks reach 60 percent of their total. Among the active banks here, 25 percent is considered substantial, although one bank would like to expand to 40 percent.

Apart from size, international banking operations in this region have a different character. Instead of financing balance-of-payments loans to foreign governments in the manner of the New York giants, they stick to smaller, shorter-term, trade-related loans. Thus, while their portfolios show loans to such debtor countries as Brazil, Argentina, Chile, Mexico, the Philippines, Turkey and Iran, these banks feel better protected against default.

RIGGS NATIONAL BANK: With offices in London and Nassau and another planned for Hong Kong, Washington's largest bank is actively looking at other locations for Edge Act offices (permitted in the United States for largely international operations) to expand its overseas banking activities.

By the end of 1979, Riggs' foreign loans amounted to $213 million, or 16 percent of a net loan total of $1.3 billion. When time deposits with other foreign banks are added the foreign portion amounts to $522 million.By the end of the first half of this year, foreign deposits, which finance foreign loans, amounted to $568 million, up $104.7 million or 23 percent since December.

Because domestic deposits rose only $40 million in those six months, it becomes obvious that much of the activity was in the foreign sector. Riggs' foreign assets of $813 million were 30 percent of total assets in 1979, making it the Washington bank with the largest foreign stake.

Though Executive Vice President James D.M. McComas would not mention specific country loans for the record, it can be said that between 30 percent and 35 percent of Riggs' overseas portfolio is in Latin America. He stated that the bank was well covered by deposits from those Middle Eastern countries in turmoil, to which it has made loans. Several troublesome loans are paying interest only at the moment and have been refinanced, the payments stretched out to avoid listing them on the books as losses.

Most of the Riggs loans are government-related or -supported. According to McComas, Riggs handles in excess of 70 percent of the government business that is channeled through private banks here. This type of loan carries a lower interest rate but less risk than a commercial loan, so McComas would like to increase the bank's government-supported portfolio.

The bank has tripled its international staff over the past five years. McComas hopes to package Riggs' expertise on how to find your way around financial Washington for sale to customers such as small U.S. manufacturers who find it "overwhelming" to approach the Export Import Bank.

AMERICAN SECURITY BANK: From offices in Nassau, Miami and Tokyo, the bank makes loans and finances the operations of overseas companies in the United States. A new facility for embassies here is in the wind, and other Edge Act branches in the United States are being comtemplated, according to Chairman W. Jarvis Moody.

Last year, American Security's foreign assets amounted to $484 million, or 23 percent of its total assets. Moody said foreign holdings this year would rise to about one-quarter of the bank's total, which puts them about $600 million at present. Foreign deposits were also up at midyear to $519 million. He expects foreign income to be flat this year due to narrower spreads on loans.

The bank has loans outstanding to 50 countries, primarily in Latin America and Europe, although the Ivory Coast also has long been a client. American Security recently financed a German steel company establishment in Virginia, a Swiss knitting firm in the Carolinas, and a German textile company in Maryland. Moody said he would like to finance Japanese companies setting up on the West Coast.

Moody's predecessor, Carleton E. Stewart, who was ousted last spring, had promoted international banking assiduously. It was said that one reason for his departure was the board's feeling that overseas was emphasized at the expense of the Washington community. Moody denied he had any disagreement with Stewart over international policy, saying, "it doesn't make any difference who is sitting in the (chairman's) chair." He noted that the international banking division had increased its personnel and that he was making many more trips abroad.

MARYLAND NATIONAL BANK: A subsidiary of Maryland National Corp., the bank conducts its international operations at a branch in Nassau and representitive offices in London, Sao Paulo and Mexico City as well as at an affiliate bank in London. An application has been made for an office in Singapore.

As of June 30, Marynat's foreign assets, including loans, placements and acceptances, amounted to $537 million, or 13.6 percent of total assets, up from 10 percent last December. Pretax income from foreign investments during the first half of this year tripled to $2.8 million.

A substantial portion of Maryland National's foreign activity, $180 million out of $537 million, is related to trade -- much of it tied to the Port of Baltimore. Senior Vice Presidents W. gRiffin Morrell, Jr. also points out that other loans classified as domestic by banking regulators actually go to finance U.S. exports.

The bank lends in 39 countries. Seventy percent of its portfolio consists of advances to banks, 25 percent is loans to private corporations and 5 percent is loans to government entities. Four-fifths of the loans are for one year or less. The bank has suffered no losses on its international loans.

Maryland National has the highest loan concentration in Japan, followed by Mexico, then Europe (primarialy Scandinavia). It has no loans on its books to Eastern European or Middle Eastern countries. "We got out of Iran eight or nine months before the shah left," said Morrell. He said the bank's loans in Brazil are mostly short-term and "not that substantial." All its loans to Argentina are externally guaranteed, and Morrel says the bank feels "comfortable" with its loans to Mexico.

Morrel expects foreign loans as a percentage of the bank's total loans will remain level this year at between 12 percent and 14 percent, but envisages the day when one-fifth of Maryland National's business will be related to overseas.

NATIONAL BANK OF WASHINGTON: Since the opening of its Nassau office in 1974, the bank's foreign assets have grown to about 20 percent of its portfolio. At midyear it had about $110 million in offshore loans out of a net total of $506 million outstanding. Overseas deposits grew 38 percent in the year ending June 30 even while they were dropping at home. Deposits from embassies and foreign banks in this country, classified under foreign operations by bank regulators, have provided a net source of income for domestic operations.

Although the bank lends in 35 countries, NBW historically has made just over half of its overseas loans in Latin America. This year, as result of its expansion into acceptances elsewhere, the percentage has dropped to about 40 percent.The bank reports no losses or problems with its foreign loans.

Senior Vice President Manuel A. Castilla said the bank plans a cautious approach in its future loan policy due to the uncertainty of the international economic situation. This means shorter-term loans and greater attention to political risk.

FIRST AMERICAN BANK, N.A., WASHINGTON: The newest and smallest entrant into the local world of international banking, the bank opened its first foreign office in Nassau in August 1979, five months after the Financial General Bankshares affiliate changed its name from Union First. By the end of last year it had correspondent relationships with 54 banks in 35 countries.

Nassau's loan generation in 1979 amounted to $2 million. During the first half of this year, it jumped to $4 million out of the bank's total net loans of $353 million.

According to Senior Vice President Richard D. Barrett, the bank's portfolio consists of trade-related loans, not supported by governments, in geographically scattered areas. However, the bank has virtually no loans outstanding to countries in financial difficulty. Barrett said the bank expects to expand cautiously in the international sector.

Should Financial General be acquired by Middle East investors under a proposed takeover now in progress, First America's international character would change more radically. In an application to the Federal Reserve, the would-be owners emphasized that their banks would be able to attract substantial new and stable deposits; i.e., petrodollars. Robert Altman, and attorney for the Middle East investors, said the new funds would be invested primarily in the United States rather than being recycled abroad.

He sees Baltimore branch of the First American Bank of Maryland financing trade, particularly to the Middle East, whereas the Washington bank would step up its investment advisory services, trust activities, and performance bonds for overseas construction and services. Another Financial General affiliate, the Bank of Commerce in New York, would also have an increased international awareness.

The number of foreign banks represented in the nation's capital is rising, although it is still minuscule compared to the number in New York, Chicago, Miami and the West Coast. Representitive offices cannot conduct direct banking activities life taking deposits and making loans. Instead, according to A.K. Puri of the State Bank of India, they act as intermediaries with the Congress, State Department, World Bank, Export Import Bank, their own embassies, national and private corporations from their countries and U.S. banks.

In addition to the State Bank of India, the following foreign banks have offices in Washington: Banco do Brasil, Bank of Tokyo, National Bank of Pakistan, Hongkong and Shanghai corp., Banco Real of Brazil, Bank of Korea and the Instituto Mobilliare Italiano. The State Bank of Abu Dhabi plans to make application soon.