The Florida International Bankers Association has a two-fold strategy to address new banking disclosure regulations that it says could spook foreign depositors and hurt Miami’s reputation as a hemispheric banking center.
FIBA is not only working with U.S. legislators on a potential legal remedy that would delay or prevent the law from going into effect, but also reaching out to its own members to educate them so they can share the correct information with their customers.
The new rule, which goes into effect Jan. 1, requires banks to report information to the Internal Revenue Service on non-taxable interest paid on accounts held by non-resident foreign nationals. It applies to accounts that earn more than $10 in interest in a year.
Potentially such information could be shared with the account holders’ home countries, raising privacy concerns among some international account holders. Some fear their home governments might make politically motivated requests for their bank information or that data indicating their wealth will leak out, bankers said.
“They’re worried about data breaches. It’s an additional fear factor,’’ said Grisel Vega, FIBA president and general manager of Bci’s Miami branch.
And those jitters have prompted some depositors to move their money to jurisdictions such as Panama or the Cayman Islands that have stronger privacy laws, said David Schwartz, executive director of FIBA. Anecdotally, he said, FIBA has heard that several million dollars have left Florida for other jurisdictions since the new regulation was passed in April.
To allay depositors’ fears, Vega said FIBA has been training its members on what the rule really means.
“The U.S. banking system is still the safest and soundest place in the world to put your money,’’ said Schwartz. “There is no reason to panic. There is a process by which the information is collected but not automatically exchanged with home countries.’’
It is the IRS that will make the determination on whether to release the information — and only as a part of a tax evasion investigation or something of that nature, said Vega.
Some of the nervousness, she said, is based on the experiences of foreign account holders with their own banking systems and their desire for safety in the U.S. banking system.FIBA also is trying to get legislative help in opposing the regulation and letting members of Congress know their concerns such as the potential negative impact of the withdrawal of nonresident deposits at a time when the U.S. economy is still weak.
WILL CHINA BUY UP THE WORLD?
Barclays Capital Research asks that provocative question in the most recent installment in a series of reports titled China Beyond the Miracle, which analyzes the implications of China’s impending transition from “economic miracle’ to more normal development trends.
China’s foreign investment is expected to increase steadily over the next decade, growing, by conservative estimates, at least $100 billion a year.
More than 70 percent of China’s foreign investment is by state-owned enterprises. While state-owned enterprises are likely to continue to dominate Chinese foreign investment in resources, finance and infrastructure, Barclays said that investment in manufacturing “is set to grow significantly as rising domestic costs in China push factories to other low-cost countries.’’
A BLOG ABOUT THE ‘NEW MIAMI’
Miami law firm Bilzin Sumberg has started the New Miami blog. It focuses on the city’s emergence as a globally significant center of commerce, culture, arts and entertainment. Writers from the law firm as well as others from the Miami business community will be featured.
Among the topics the blog will cover are: real estate investment and land development, litigation and arbitration, finance, foreign investment and tax, public-private partnerships, hospitality, and construction.
“In a few short years Miami has transformed itself from being an outpost for Latin America to an epicenter of commerce on a global scale,’’ said John Sumberg, managing partner at the firm.
The blog can be visited at www.newmiamiblog.com.