ANNAPOLIS -- Foreign investment in Maryland banks is not a threat to the banks or the state economy, Bank Commissioner Margie Muller said last week.

"As long as we have {regulatory} control over what happens in Maryland, I don't think there is any great jeopardy in foreign ownership," she said.

Muller testified last week at a hearing before the Senate Finance Committee on foreign ownership of Maryland banks.

Committee Chairman Sen. Cathy Riley refused to allow discussion of the current takeover attempt of Bank of Baltimore by First National Bank of Maryland, which is wholly owned by Allied Irish Bank.

Riley called, instead, for a general discussion of foreign investment in Maryland banks.

Muller said 15 percent of all Maryland bank assets are owned by foreign investors, compared with a national average of 21 percent.

Muller told the committee that Maryland businesses "could not manage without {foreign} capital in terms of statewide development."

"That's a frightening statement to make," said Sen. Thomas P. O'Reilly, (D-Prince George's).

He asked Muller at what point she would be concerned about the extent of foreign ownership of Maryland banks and how it might affect the state economy.

She said she would become concerned only if any one bank controlled too large a share of the banking industry.

The committee got a different viewpoint from Susan J. Tolchin, co-author of a book on foreign ownership of American businesses. She appeared as a witness for the Bank of Baltimore.

Tolchin said there are benefits to foreign investment in American banking, including the additional capital available for borrowers. But there are also negatives, she said.

"This should matter to the people of Maryland," Tolchin said. "Will it be as easy for me to get a mortgage from the Bank of Tokyo as a local bank?" she asked.

Tolchin said most of the profits "of foreign investment return home" and that political decisions are made by the home bank. It is also easier for foreign banks to hide assets, making it more difficult to regulate them, she said.

Because of the rapid growth in foreign investment in American banking, "it is time to talk about a ceiling on foreign ownership of banks," she said. "We don't want to wake up in the 20th century and ask where our assets have gone. It won't be possible to get them back."