Foreign banks mine lucrative US markets. American banks are often at a disadvantage on home turf; will capital requirement rules make the playing field level?

Canadian banks own parts of several banks in Illinois and have offices in New England. Japanese companies run money centers in California. British banks have deep roots in New York and Boston. A Spanish bank holding company owns a cluster of institutions in New Mexico. They've come for a piece of the rock in American banking. Joined to a lesser degree by Israel, Yugoslavia, Brazil, Ireland, and many others, they are buying into or acquiring banks in lucrative United States markets.

``Global companies need global banks,'' says Robert Dugger, chief economist and director of policy development for government relations at the American Bankers Association.

As foreign companies continue to spread their operations throughout the US - the biggest market for banks in the world - foreign banks are following up to meet the credit needs of their clients.

``It's economically desirable for a financial institution to follow its corporate clients around the world,'' says Allen Mottur, a banking analyst at Temple, Barker & Sloane, a Massachusetts consulting firm.

There are now more than 400 foreign banks in the US. While major US banks have opened subsidiaries in Europe and Asia to serve US corporations, the big push today is by foreign banks into the US market. American banks have been somewhat handicapped in this global race. Even within the US, domestic international banks find themselves at a disadvantage.

In an effort to produce a more level playing field and open up world financial markets, bank regulators in 12 nations proposed the adoption of new capital standards last year. The tougher standards would require commercial banks to maintain a certain level of capital based on the amount of risk they carry in their portfolios, and against their off-balance-sheet items, such as loan commitments, standby letters of credit, and foreign-exchange contracts.

If imposed, ``almost all banks will have to raise additional capital to meet the standard,'' says Paul Pilecki, general counsel to the Institute of International Bankers in New York.

US banks generally opposed the standards because of the sizable amount of capital they would need to raise. In addition, some of the items that have counted as capital in the past will not be counted as such in the future.

But the new standards are likely to put everyone on the same footing. Even with their hidden reserves, Japanese, French, and West German banks will have to add to their capital if they want to keep growing, according to economists at Moody's Investors Service.

The standards could also give the US a boost where foreign acquisitions of domestic banks are concerned.

``The Federal Reserve Board applies its capital standards to US bank holding companies,'' says Mr. Pilecki; ``but for foreign banks that come in to make acquisitions, the Fed has deferred to the standards of the home country.

``The Fed is under pressure from domestic banks to rationalize the capital standards so they can compete for bank acquisitions here on the same basis.''

Although the majority of foreign banks are set up primarily to serve their overseas corporations, some, particularly Japanese banks in California, have penetrated the US banking retail market, a difficult task, analysts say.

Breaking into retail banking - providing mortgages, checking, savings, and payroll accounts - requires an understanding of the competitive factors at the retail level, as well as the whole cultural environment, says Michael Starr, a banking analyst at Duff & Phelps Inc. a brokerage firm in Chicago. ``It's very expensive and time consuming'' for a foreign bank to start from the ground up, he says. Not many have tried, and even fewer have succeeded.

One way to do this, however, is through acquisition, which has been made much easier by the dollar's steady decline against other currencies. Japan's presence in California is largely due to its purchase of West Coast banks.

In fact, foreign banks have captured a third of California's total bank assets. Non-US banks extend about 50 percent of the middle-market loans in California and hold about 20 percent of deposits in the state, says Duane Hansen, managing director of the Worldwide Financial Services Industry Group at Arthur Andersen & Co., the accounting and consulting firm.

A good example is Sumitomo, he says. This major Japanese holding company is the fifth-largest foreign bank institution in the US, and is striving hard to make inroads in the retail market throughout California.

The Japanese have been successful in the state for a number of reasons, including the region's high ``comfort factor'' - its large Japanese-American population - says Mr. Starr, at Duff & Phelps. This attracts both Japanese companies and banks.

The new Japanese owners ``tend to be very good managers,'' says Mr. Hansen, ``and they bring in maybe 5 percent of their own people, leaving the institutions predominantly American.''

American banks have been unable to break into retail banking in overseas markets. Only in the wholesale market has the US developed a major niche, handling 45 percent of Japan's foreign-exchange business and a large part of London-based Eurocurrency transactions, Hansen notes.

``The big [foreign] banks that do business here have an enormous market share in their [home countries], but our biggest international banks are a relatively small fraction of the US banking system,'' says David Cates, a banking analyst and president of Cates Consulting Analysts Inc. in New York. ``Japan is much more closed, partly because they have ways of discouraging [penetration].''

Historically, banks in countries enjoying favorable trade balances have been the most competitive. That was true for Holland in the 17th century and England in the 19th century, Mr. Cates says. US banks prospered internationally in this century. Now, Japan is enjoying the advantage.

Foreign debt and the dollar's decline have hampered US banks' competitiveness. Even acquiring other domestic banks is difficult today. Since 1981, major US money-center banks have seen their credit ratings downgraded, while their overseas rivals enjoy triple-A ratings.

This is, however, one reason that banking analysts view the presence of foreign banks in the US as positive. They provide US companies and industry with a wealth of capital, says Mr. Mottur at Temple, Barker & Sloane. And since, on the whole, foreign banks tend to stick with financing for their own US-based companies, they bring in more retail banking opportunities for domestic banks, says Mr. Dugger at the bankers' association.

US banks also continue to complain that restrictions on their entering the securities industry have exposed them to unfair competition, since foreign banks can be involved in both these activities in the US.

Although Japan has similar walls between banking and securities underwriting, Canada, France, West Germany, and other nations do not. British banks are fully deregulated. The US is moving slowly toward removing these barriers, Hansen says. But in the meantime, he notes, domestic banks are hampered in the global banking race.