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Banking - International expansion of commercial banks - Essay Example
Author : reingerelouise
Finance & Accounting
Pages 3 (753 words)
Name Tutor Subject Date Banking - International Expansion of Commercial Banks Internationalization of commercial banks recently has been on the rise owing to mainly the global economic integration and reduced regulatory and cultural barriers as witnessed in the recent past…
However, despite the benefits associated with this trend of internationalization such as the availability of funds, risk diversification and enhancement of efficiency in the local banking sector, it also has the demerit of causing financial shocks to an economy as observed in the recent financial crisis. Considering the increased expansion and growth of international trade and business networks, internationalization of banking sector has become very important to our current global economy. This is because through international banks access to funds has been eased especially to credit-constrained firms and households; in addition, this has introduced competition in the local banking sector that has led to increase of consumer surplus due to decreased rates of borrowing and increase on interest rates paid on deposits. Furthermore, this competition has led to local banks being more efficient and as a result enhancing economic stability Internationalization of the banking sector has the benefit of facilitating capital flows especially from the economies rich in capital to the poor ones where the returns are perceived to be higher (Mullineux & Murinde 4). This in turn enhances the growth of the poor economies by boosting their savings and investments as well as reducing their capital costs. ...