Globalization and Banking
The recent global financial crisis has renewed interest in the topic of globalization and banking. This topic illustrates both the benefits and risks of closer integration. Prior to the crisis, international banks were seen as important contributors to financial development and economic growth. The increase in financial globalization that occurred in the decade before the crisis reflected this belief.
While the globalization of banking is an empowering force for global development, the risks of international banking are not without risk. These include retrenchment pressures in home countries and the erosion of local skills. Therefore, developing countries should be cautious in granting foreign banks access to their domestic markets. While the lack of home country supervision and prudential regulation may pose a risk, the regional expertise gained by foreign banks may compensate for the inadequacy of home country supervision and regulation.
In addition to the risks, globalization also creates openings for new political dynamics. These openings may lead to struggles for power in the new environment. Financial globalization also creates challenges to national sovereignty, and domestic groups may be deprived of access to financial services. For example, non-nationally owned banks could take over the domestic banking system.
In Argentina, deposits were moved from private banks to foreign institutions. The government intervened in private deposits during the decades before, but now they are outside the reach of the government. While foreign banks were not subject to government bank policy in Argentina, they were still used as a symbol of identity in favourable conditions. For Mexico, the last privately owned bank, Banorte, carefully manipulated its ownership status in public relations and market surveys.
Globalization and Banking: In the last decade, the relationship between globalization and banking has been recognized as essential. The emergence of the global economy has created new opportunities and challenges for the banking sector. As a result, the study of globalization has been crucial in identifying how globalization affects the industry.
As global financial flows have increased, the incidence of bank crises in emerging economies has increased. In this paper, we examine the impact of financial globalization on the incidence of systemic bank crises in 20 emerging markets. We find that countries with more liberal de jure capital regimes have lower incidences of banking crises, while countries with fixed exchange rates increase the risks of these crises.
In the post-WWII era, many developed countries put stringent controls on cross-border capital flows and domestic financial institutions. These restrictions were intended to protect the domestic economy from shocks from abroad. Throughout the 1970s, these policies were also implemented in developing countries. Today, the role of retail banks in the global economy is becoming more important.
In the 21st century, the English-speaking Caribbean is a unique player in the global financial polity. The English-speaking Caribbean is one of only a few developing regions to have national champions in global financial circles.