The Multinational Vehicle

As U.S. and Western European companies in search of new markets spread their operations across every continent, their craving for capital has drawn the free world's great banks after them. Not content with setting up ordinary foreign branches (U.S. banks alone now operate 244) and buying into existing banks in other countries, Western bankers have lately swung toward the creation of entirely new multinational banks. In one of the most ambitious ventures of its kind yet, five banks from four nations this week will open a jointly owned bank in London's prestigious Threadneedle Street.

Called the International Commercial Bank, the new institution was formed by London's Westminster Bank, Manhattan's Irving Trust Co., Chicago's First National Bank, the Hong Kong and Shanghai Banking Corp., and Duesseldorf's Commerzbank. As an offspring of the rich (the five banks control resources totaling $18.8 billion), I.C.B. will start life with $8,800,000 capital plus another $16.4 million in loans from its parents. For deposits, it counts on tapping the volatile pool of Eurodollars --U.S. funds held in European hands --which has swelled from nothing to close to $13 billion over the past decade to become a major new force in international finance.

Filling a Financial Gap. The five founder banks already operate a vast network of 2,365 branches in 34 countries, and I.C.B. sees these as its prime source of loan customers. "We expect to be able to finance projects anywhere in the world," says Donald Robson, joint general manager of Westminster Bank, who this week is due to be named general manager of the new operation. Commercial banks operating abroad deal largely with short-term loans of a year or less; securities underwritten by merchant banks provide long-term credit. By specializing in loans of one to six years to top grade corporations, Robson adds, I.C.B. "will fill a real gap in the financial market. We expect to be damned active."

Some of that gap has already been plugged by other combines. In 1964, London's Midland Bank joined the Commercial Bank of Australia, the Standard Bank of London and the Toronto-Dominion Bank to create the Midland and International Banks Ltd. (capital: $56 million). Three months ago, Britain's Barclays Bank, the Bank of America, Italy's Banca del Lavoro, Germany's Dresdner Bank, Algemene Bank of The Netherlands and Banque Nationale de Paris formed Societe Financiere Europeenne (capital: $7,800,000), with head offices in Paris and Luxembourg.

Time was when global companies might simply have turned to New York or London for their funds. But balance-of-payments deficits have caused both Britain and the U.S. to check the outflow of money. By devising new organizations to operate with Eurodollars, the bankers have promoted healthy--and presumably profitable--competition among themselves. By making more credit available to private companies, they will also foster the growth of competition-minded Western businesses all over the world.

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