From the Aug. 20 issue of Forbes:
As if American banks didn't have enough headaches, now they will find themselves competing to raise funds in U.S. capital markets against giant Japanese banks.
Recently Sumitomo Bank, the world's third-largest bank, with $407 billion in assets, raised $500 million through an issue of 10-year subordinated notes in the United States. The annual interest rate was a low 9.55 percent. Large U.S. banks like Chemical Bank or Chase Manhattan pay over 11 percent for long-term debt capital. The Japanese advantage comes at a time when federal regulators are urging U.S. banks to raise their capital to exceed 8 percent of assets by 1992. Raising that capital will be a tough task for a number of big U.S. banks, some of which now have capital of less than 8 percent.
Over the next few years, about 10 Japanese banks are expected to raise several billion dollars in debt in the United States. The Japanese can use this lower-cost money to expand their U.S. operations. In fact, Japanese banks intend to open or expand 27 offices in 13 U.S. cities. ...
Why raise long-term capital in the United States when Japanese banks can raise capital at cheaper rates in Japan? One reason: The decline in the value of the yen this year has, in effect, shrunk the value of the yen-dominated capital the Japanese hold against their U.S. banking assets. By raising capital in dollars in the United States, Japanese banks can minimize the effect such currency swings have on their capital ratios. Moreover, because of recent declines in the Japanese stock market, the Ministry of Finance wants Japanese banks to raise money outside Japan rather than at home. No sense depressing Tokyo stocks any further.