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Palm Beach Daily Business Review
Forget Moon Launches, Banking Is Stressful
June 1, 2004
Palm Beach Daily Business Review
Volume 50; Issue 195
Miami international banker Agustin Abalo hasn't been this stressed about a job since 1970 when he was an engineer on NASA's troubled Apollo 13 mission to the Moon.
The mission's three astronauts - whose story was told in a movie starring Tom Hanks - returned to Earth safely, but only after teamwork and ingenuity helped them overcome a crippling explosion on their spacecraft.
Some 34 years later, Abalo finds himself in another difficult situation that could also have grave consequences - albeit not life threatening.
Abalo has been elected president of the Florida International Bankers Association at one of the most arduous times for the group in its three-decade history.
South Florida's international banking community is in a nosedive as the number of foreign agencies, assets under management and loans have been in steady decline for the last six years.
The number of foreign agencies in Florida has shrunk to 29 in 2003 from 42 in 1998, according to the state's Office of Financial Regulations. During that same period, assets fell to $14.8 billion from $20 billion and loans to $3.6 billion from $12.4 billion.
Worsening market conditions, consolidation and added regulatory burdens cloud the future of many international banks.
"This is much more stressful," said Abalo, who is also director of operations for Banco Santander International's 300-person office on Brickell Avenue in Miami. "Running a bank in modern days is much more stressful."
Abalo said banking is no longer about having the right products, services and underwriting policies. The Bank Secrecy Act, the USA Patriot Act and other stringent regulations targeted at eliminating money laundering are forcing banks to rethink operations. The biggest pressure: learning the funding source of every client despite the challenges that poses when it is a foreign individual or company.
Fearing they might err and be rebuked by regulators, bankers are giving up lucrative, legitimate businesses, Abalo said. For example, many South Florida banks have quietly scaled back or eliminated their correspondent services, especially payment-through-service accounts, Abalo said.
Those accounts allow foreign residents to open an account at a U.S. bank through their local institution. Previously, the U.S. bank only had to know its foreign bank counterpart, not each of that foreign bank's clients.
The penalties for failing to do so include public reprimands, fines and damaged reputations. Outgoing president Thomas Noonan experienced that last week when his BAC Florida Bank in Coral Gables was hit with a cease-and-desist order that criticized the bank's anti-money laundering procedures.
Abalo was elected without opposition as FIBA's 2004-05 president last Wednesday based on his platform of providing members with pertinent information.
Abalo said he wants to keep FIBA members better informed about economic, legal and regulatory issues affecting their profits and public image.
"Information is the key for bankers to make decisions," Abalo said. "We are not getting sufficient information."
To that end, Abalo wants to strengthen FIBA's contacts with banking associations in the United States, Latin America and Europe. FIBA wants to improve an already strong bond with the Federation of Latin Banks known by the Spanish acronym FELABAN and share more information with the organization, which is based in Bogota.
"I would like to expand our relationship and become like their eyes and ears in the United States," Abalo said.
Abalo said he also wants to establish a formal connection with an association that services international bankers in Western Europe.
FIBA is also trying to improve its relationship with U.S. bankers by working more closely with the Conference of State Bank Supervisors. That organization represents state banking officials who govern state-chartered banks and more than 400 state-licensed foreign banking offices, according to the CSBS Web site.
FIBA's annual anti-money laundering conference will for the first time next year be co-hosted by the association. Previously, the supervisors held their annual event in Miami in the weeks before the FIBA conference, said Tim Bergan, a senior vice president of international banking with the Washington, D.C.-based organization. He said the co-sponsored event could be more productive and efficient for regulators and bankers alike.
"As an operating principle, we agree as regulators with what Gus is saying about having good, timely, reliable information for banks to perform their compliance," Bergan said. "It is good for bankers and it is good for regulators. We wholly support Gus' initiative."
Abalo's emphasis on providing timely, pertinent information also has him relying on local experts to chair three key committees. Attorney Clemente Vazquez-Bello of Gunster Yoakley & Stewart of Miami will oversee the bank secrecy act and anti-money laundering committee; attorney Bowman Brown of Shutts & Bowen will run the legal and regulatory affairs committee; and security expert Tom Cash of Kroll Associates in Miami will head the newly created fraud prevention committee.
Cash, a former special agent in charge of the Drug Enforcement Administration in Miami, said the committee will work to assist banks to better protect themselves against international fraud. Identity theft will be the focus because of its role in practically all aspects of bank fraud, he said.
Cash said Abalo has given his committee the goal of helping banks to deal with their unspoken secret of fraud. He said banks don't like to disclose losses for fear of tarnishing their reputation and attracting copycats.
"He [Abalo] has a vision that says idiocy is doing things the same way and expecting a different outcome," Cash said.
Abalo expects consolidation of South Florida's international bank industry to continue as tougher U.S. banking rules squeeze out smaller institutions. He said the initial investment and ongoing costs of meeting those regulations are roughly the same for all banks, and only large institutions can absorb the expenses and remain profitable.
At the same, banks are merging offices to achieve economies of scale.
And economic troubles in Latin America have caused some countries - notably Argentina - to default on their international debt, spooking major banks and institutional investors away from similar losses in the region.
The Argentine government's offer to repay only about 25 cents on the dollar of its foreign debt has many lenders and investors leery about doing business in the region. This fear has undercut the need for international banks to maintain their operations in Miami.
Banking has changed considerably since Abalo first started in the technology department with Banco Popular in Puerto Rico in 1971. He came to Miami in 1976 as a manager for Coopers & Lybrand and after a stint at Price Waterhouse from 1978 to 1982 was hired as Miami general manager for Banco Popular Dominicano. The foreign agency closed its Miami operations in 1988, leaving Abalo jobless.
He soon joined the Murcia Puchades Group in Alicante, Spain, as a consultant and helped the company restructure its finances.
Abalo returned to Miami in 1991 to form a bank-consulting firm called IMAC with local economist Manuel Lasaga. They and former law firm Valdes-Fauli Bischoff Kriss & Mandler, the company's majority owner, sold to Electronic Data Systems in 1994.
Abalo joined Banco Santander International in January 1996 and has been there since. His bank is an Edge Act institution chartered in the United States and may not accept deposits or lend money to domestic residents or entities unless the money is to be used outside this country.
Before he was a banker, Abalo worked as an engineer with Grumman Aircraft Engineering Corp. in Bethpage, N.Y., helping to build the lunar module portion of the Apollo spacecraft.
Abalo worked on five missions, including Apollo 11 in which Neil Armstrong took man's first steps on the moon.
Abalo ranks his work on Apollo right up there with his election as FIBA's president.
"Those are the two greatest achievements of my professional career," he said.