4. INTERNATIONAL BANKING. Prior to the enactment of the Federal Reserve Law (q.v.) under which National banks have obtained authority, to establish branches in foreign countries, international banking upon the part of the United States had been mainly confined to investment banking, and efforts to place American securities in Great Britain and the countries of western Europe. The most ambitious effort to enter the commercial field had been made by the International Bank ing Corporation, chartered in 1902 by the State of Connecticut, which began business with a capital of $3,000,000 and surplus fund of $3,000,000. It had at that time 15 offices abroad, most of them in Asiatic countries.
The Need of Foreign Banking Facilities. —Although the slow development of American banking operations in the foreign field may be attributed in part to the fact that the national banking to which most of our large banking institutions in the past have belonged, until recently made no provision for such ex tension, it is also true that there has been little inclination among American bankers to so ex tend their business. The fact that branch bank ing has had small development within the United States will partially explain the seeming lack of interest in branches abroad. The com paratively few branch establishments that are maintained in this country, with few exceptions, are located in the same city with the head office, and the great bulk of the banking business is done by independent, locally owned, institutions which have but a single office. Our people have been inexperienced in branch banking, and not accustomed to entrusting large powers to scattered officials at great distances.
The chief explanation, however, for the in difference of American bankers to international opportunities is to be found in the same general situation which accounts for the slow develop ment of American interest in foreign •invest ments and foreign trade, to-wit: the all-absorb ing needs and attractions of the home field. There has been no inducement for banking capi tal to go from the United States to other fields for the mere profits of commercial banking. All foreign fields are already occupied by domestic banking institutions, which are likely to have the preference for purely domestic busi ness, and by British or European banking cor porations which are more or less allied with other important investments in the same countries, and with interests that are active in trade with these countries. It has been evident that American banks abroad would have little reason for. their existence unless they were serviceable to American trade and American capital in the same manner that British and German banks have been serviceable to the trade and investments of those countries.
With the development of this country, the growth of its industries and the accumulation of capital, the attitude of its people toward trade and investments abroad has been chang ing. Our exports no longer consist almost ex clusively of natural and crude products. The United States has become the leading.producer and a heavy exporter of steel and machinery, and is rapidly increasing its exports of a great variety of manufactures. At this stage bank ing facilities abroad become a factor in the development. If American banks in foreign countnes require for their prosperity that there shall be American trade with those countries, so does American trade have need for an ex tension of its own banking facilities..
The services which a banker can render for his client in foreign countries are in most par ticulars the same that he renders at home, but obviously there is greater dependence upon them abroad than at home, and there are special services incidental to the fact that goods are delivered and collections are made in foreign countries. The distances are great, mails are slow and cables costly; the habits and customs of the people are different, trade conditions are different, the language is usually different, and the chances of misunderstandings and dis agreements are more numerous than in trade at home. There is great help to the exporting house in having an interested representative on the ground where deliveries and collections are made, and next in efficiency to his own ex clusive agent is the branch office of an Ameri can bank. Collections may be, indeed, made through a domestic bank, or through a branch office of one of the European banks, but it is not to be expected that these institutions will feel the same interest in promoting the trade that will be felt by an American bank, which realizes that its own future is involved in the development of American trade. It is more than possible that the interests of the American exporter may clash with the interests of older and closer clients of a European bank, and in such instances the invoices and terms of impor tant transactions may become Icnown to com petitors. In any event there is a lack of the alert, interested attention that arises from a vital common interest, and from the direct con nection through the home bank There is likely to be a clearer presentation of the exporter's case through the latter channel.