Financial liberalization has caused a jump in volatility and risk in the past.
Examples are: the 1994-1995 Mexican peso crisis and the 1997 Asian crisis. Due to international interdependencies the Asian crisis i.e. dragged down the Russian and Brazilian economy. Both crises resulted from inadequately monitored large-scale flows of private, short-term capital (Bank for International Settlements 1998).
Furthermore the opening of national capital markets in many countries led into financial sector crisis. Cost of such crisis can reach 3 per cent to 25 per cent of GDP. The United States Savings and Loan crisis cost the world’s strongest economy 3 per cent of GDP. Japanese loan crises cost the economy an immeasurable amount of money, the absolute loss in smaller countries can even be bigger. Recent cases include i.e. Venezuela, 18 per cent; Bulgaria, 14 per cent; Mexico, 12-15 per cent; Hungary, 10 per cent. Other cases of even weaker economies like Argentina, Chile and Côte d’Ivoire have experienced costs of over 25 per cent of GDP in their crises (Goldstein, Turner 1996). Another trend was recognizable 20 years ago, due to deregulation the banks noticed increasing competition followed by lower margins. That is why many banks started to bank global. Not only to stay into the increasing competition had they followed their global going customers on foreign markets. Owing to the increasing need to hatch back the rising risks of dealing in foreign currencies, the volume of derivatives trading increased enormously. Many “rough traders” have seen their way to easy, quick money. One of them was Nick Leeson of Bearings ruining his company on the SIMEX exchange in Singapore. Due to this globalisation of banking, technological change and an increasing range of financial instruments and products the banking sector continued growing.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- The Transformation of International Finance
- Third-Market Trading
- EuroDollar Market
- Why Growth Continued
- Globalisation
- Technological Changes
- Financial Innovation
- Deregulation
- Recent Changes in Regulation
- Future Markets Insuring Continuative Growth
- Compendium
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This assignment delves into the reasons behind the growth of international banking during the latter half of the 20th century, particularly exploring the role of regulatory avoidance. It examines how international banking has continued to expand despite reductions in regulatory constraints.
- The transformation of international finance and the impact of globalization on banking practices
- The emergence of third-market trading, specifically the Eurodollar market
- The drivers of continued growth in international banking, including technological advancements and financial innovation
- The influence of deregulation and its implications for the banking industry
- Recent changes in regulations and their potential impact on future growth
Zusammenfassung der Kapitel (Chapter Summaries)
The introduction sets the stage by exploring the historical context of international banking, highlighting the volatility and risk associated with financial liberalization. It discusses notable financial crises, such as the Mexican peso crisis and the Asian crisis, and the impact of global interconnectedness on these events.
The second chapter examines the transformation of international finance, highlighting how companies expanded their operations globally, often exceeding the capabilities of their traditional financial partners. It delves into the complex changes in national controls on foreign currency transactions and regulations that accompanied this growth.
The third chapter focuses on the emergence of third-market trading, specifically the Eurodollar market, which allowed for the development of new financial instruments and facilitated cross-border transactions.
Chapter four explores the factors that contributed to the continued growth of international banking, including globalization, technological advancements, financial innovation, and deregulation. It analyzes how each of these elements shaped the industry's trajectory.
Schlüsselwörter (Keywords)
The key concepts explored in this assignment encompass international banking, regulatory avoidance, globalization, third-market trading, Eurodollar market, technological change, financial innovation, deregulation, and the impact of these factors on the growth and evolution of the industry.
- Arbeit zitieren
- Honours Bachelor of Arts Business Management Jonas Schirm (Autor:in), 2006, Why has the growth in international banking continued despite a reduction in regulatory constraints?, München, GRIN Verlag, https://www.grin.com/document/57356
