Florida banks oppose foreigner accounts proposal

* IRS seeks change to non-U.S. resident bank accounts

* Proposal calls for banks to report interest payments

* Florida bankers say move would hurt banking industry

By Kevin Gray

MIAMI, Feb 1 (Reuters) - Banks operating in Florida are criticizing a U.S. proposal that would require banks across the country to report to American tax authorities interest earned by U.S. bank accounts held by foreigners.

Florida is a leading banking center in the United States and home to at least $50 billion in deposits from non-U.S. residents, many of them from Latin America, according to banking officials.

Under current U.S. regulations, banks report interest earned on bank accounts held by American citizens to the Internal Revenue Service. That requirement does not apply to most foreigners, except Canadian citizens.

The proposed change by the U.S. Treasury Department and IRS comes as global banking regulators look for ways to increase financial transparency and follows a U.S. probe of Swiss bank UBS AG (UBSN.VX)(UBS.N) and its activities helping American clients hide money from U.S. tax scrutiny.

The proposal will be the subject of a public hearing in Washington in April.

But the Florida Bankers Association, one of the state's leading banking groups, has warned that, if implemented, the proposal could lead to bank customers from outside the United States shifting their money to other countries.

"We are convinced that adoption of the proposal will place U.S. banks at a competitive disadvantage relative to the banks of our trading partners and will result in significant withdrawals of foreign deposits from U.S. banks," said Alex Sanchez, president of the group.

"That's money our banks use to lend to small businesses to create jobs."

Foreign customers are "concerned their personal bank account information could be leaked by unauthorized persons in their home country governments to criminal or terrorist groups, which could result in kidnappings or other terrorist actions being taken against them and their family members," Sanchez said.

Officials at the IRS did not immediately respond to a request for comment.

The initiative was first introduced just over a decade ago, but was later withdrawn after banking groups raised concerns it would lead to capital flight by non-U.S. residents.

Foreigners have $10.6 trillion passively invested in the U.S. economy, including some $3.6 trillion held in U.S. banks and securities brokers, according to the Commerce Department.

Sanchez said his group planned to visit with U.S. lawmakers and officials at the Treasury Department to discuss the proposed change. (Editing by Pascal Fletcher and Andre Grenon)