Handbook of international banking edited by andrew w MUllineux and victor

10.2 Foreign exchange dealers in the United States 23814.1 Definitions of explanatory variables tested 39014.2 Panel logit model accepted as superior to its multinomial14.3 Results of mul

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Library of Congress Cataloguing in Publication Data

Handbook of International Banking / edited by Andrew W Mullineux and Victor Murinde.

Includes index.

1 Banks and banking, International—Handbooks, manuals, etc.

PART I THE GLOBALIZATION OF BANKING

1 Globalization and convergence of banking systems 3

Andrew W Mullineux and Victor Murinde

2 Multinational banking: historical, empirical and case

Elisa A Curry, Justin G Fung and Ian R Harper

3 Asset-backed securitization, collateralized loan obligations

Warrick Ward and Simon Wolfe

PART II BANKING STRUCTURES AND FUNCTIONS

Jean Dermine

5 Competitive banking in the EU and Euroland 130

Edward P.M Gardener, Philip Molyneux and

Jonathan Williams

6 How to tie your hands: a currency board versus an

Jakob de Haan and Helge Berger

9 Universal banking and shareholder value: a contradiction? 207

Ingo Walter

10 Foreign exchange trading activities of international banks 237

Jürgen Eichberger and Joachim Keller

11 The settlement and financing of international trade 259

Ayse G Eren

12 Costs and efficiency in banking: a survey of the evidence from

Leigh Drake

PART III BANKING RISKS, CRISES AND REGULATION

13 Country risk: existing models and new horizons 327

Sarkis Joseph Khoury and Chunsheng Zhou

16 Some lessons for bank regulation from recent financial crises 428

Niels Hermes, Robert Lensink and Victor Murinde

19 International banks and the washing of dirty money: the

Kent Matthews

20 The regulation of international banking: structural issues 572

Richard Dale and Simon Wolfe

21 US banking regulation: practice and trends 612

Joseph J Norton and Christopher D Olive

22 Deposit insurance and international banking regulation 637

C Charles Okeahalam

PART IV THE EVOLVING INTERNATIONAL FINANCIAL

ARCHITECTURE

23 The institutional design of central banks 671

Falko Fecht and Gerhard Illing

24 The International Monetary Fund: past, present and future 699

Ian W Marsh and Kate Phylaktis

25 Reforming the privatized international monetary and

Jane D’Arista

26 Globalization, the WTO and GATS: implications for the

Victor Murinde and Cillian Ryan

8.1 The bank’s profits and composition of investments 1978.2 Organizational structure of a typical Islamic bank 200

16.1 Real estate and stock prices in selected Asian countries 43516.2 Financial sector lending: growth and leverage, 1990–96 441

19.4 Return–safety–confidentiality trade-off 55419.5 Loan and deposit markets: partial equilibrium 55919.6 Loan and deposit markets: effects of an increase in degree

20A.3 Japanese new financial regulatory structure 602

20A.4c US Glass–Steagall reform: Financial Services

ix

23.1 A control problem of the central bank:finding a

23.3 Asymmetric information and inflation expectations 681

23.5 The effect of a conservative central banker 68823.6 Central bank independence and average macroeconomic

23.7 The Walsh contract between the government and the

25A.4a International open market operations (expansionary) 74825A.4b International open market operations (contractionary) 749

3.1 European MBS/ABS issuance by asset type, 1997 and 1998 623.2 Some of the major CLOs issued, as at January 1998 683.3 Example of CLOs in facilitating a higher RAROC on

4.2 Top underwriters of US debt and equity, January to July

4.3a Mutual funds managers in France, December 1996 1114.3b UK league of segregated pension fund managers, 1998 111

5.1 Number of banks: banking system, 1984–1997 131

5.3 Concentration in European banking, 1997 133

5.5 Non-interest income/gross income, 1984–1997 135

5.8 Extent to which strategy has been revised in response to the

5.9 Nature of strategic responses to the SMP for broad product

6.2 Macroeconomic performance under alternative exchange

xi

10.2 Foreign exchange dealers in the United States 23814.1 Definitions of explanatory variables tested 39014.2 Panel logit model accepted as superior to its multinomial

14.3 Results of multinomial logit regressions using PROFIT1 39314A.1 Banks included in the International Pool 40115.1 ‘Commercial crises’, eighteenth and nineteenth centuries 409

15.3 Recent banking problems in major economies 412

16.2 Stock market prices index (property sector) 43616.3 Private capital flows to Asian countries 43716.4 Bank lending to private sector (% growth) 43916.5 Bank lending to private sector (% of GDP) 440

17.1 Bills, loans and overdrafts of commercial banks, classified

17.2 Net private financial flows into Thailand 49117.3 Movements in interest rates and exchange rates during the

18.1 Overview of empirical studies on the determinants of

18.2 Capital flight and policy uncertainty 537

20.2 Recent European cross-functional mergers, 1998–1999 57920.3 Recent US cross-functional mergers, 1997–1998 58020.4 Traditional-style regulatory framework 58520.5 Structure offinancial regulatory agencies 59022A.1 Design features of explicit deposit insurance systems, 1995 666

25.2 Capital flows to developing countries 725

25.4 Highly indebted poor countries: a profile 733

9.1 Universal bank organization structures 2099.2 Book, market and potential equity values in universal banks 2119.3 Estimated major bank IT spending levels 2149.4 Economies of scale and scope in financial services firms –

9.6 Price-to-book ratios of US money-centre and major

9.9 Comparative return analysis: Chase Manhattan Bank,

13.1 Bank sector performance relative to the S&P 500, the Dow,

13.2 Frequently used variables in qualitative and quantitative

13.8 Statistical release: country exposure lending survey 34913.9 Summary of proposed country risk model 36113.10 The extension of the probit model of country risk 362

xiii

Helge Berger is currently at the International Monetary Fund At the time

of writing he was Research Director, CESifo (Center for Economic Studiesand Ifo Institute for Economic Research, Munich, Germany) and SeniorLecturer at the University of Munich (LMU) Berger received his Mastersdegree and his PhD in economics from the University of Munich He hasbeen at Princeton University’s Woodrow Wilson School as the John FosterDulles Visiting Lecturer He has written a number of papers on Germanmonetary policy He has also worked in several other fields, includingGerman and European monetary policy, central bank independence, regu-lation and exchange rate systems

Elisa A Curry was employed as a research assistant at the Melbourne

Business School for four years from 1997 to 2001 conducting research intothe Australian financial services industry Her research on financial con-vergence in the Australian financial services sector (conducted jointly with

Professor Ian Harper) was published in the North American Actuarial Journal in 2000 Her research into the economic costs of retail payment

instruments in Australia was cited in the 1997 Australian Financial System(Wallis) Inquiry She is currently employed as an investigative officer at theAustralian Securities and Investments Commission

Jane D’Arista is Director of Programs at the Financial Markets Center in

Philomont, VA Previously she taught on the graduate programme

in International Banking Law at Boston University School of Lawand served as Chief Financial Economist for the Subcommittee on Tele-communications and Finance of the House Energy and CommerceCommittee Before that, she served for five years as an international analyst

at the Congressional Budget Office and for 12 years as a staff member of

the House Banking Committee Her publications include The Evolution of U.S Finance, a two-volume set published by M.E Sharpe in 1994.

Richard Dale is Professor of International Banking at the University of

Southampton, UK, Visiting Professor at the University of Reading andVisiting Professorial Fellow at Queen Mary and Westfield College,University of London He has written extensively on the subject of

xv

financial regulation and is a member of the European Shadow FinancialRegulatory Committee.

Humayon A Dar is a lecturer in economics at Loughborough University,

UK His interest in Islamic banking stems from his studies at theInternational Islamic University, Islamabad Dr Dar further studiedIslamic finance at the University of Cambridge and received his PhD in

1996 Since then he has published many papers on Islamic economics,banking and finance and has advised government and non-governmentorganizations As a specialist in Islamic economics and finance, he has beeninvolved in organizing seminars and conferences in this field He ispresently a joint director of the MSc programme in Islamic Economics,Banking and Finance at Loughborough University In addition, he is inter-ested in microcredit financing, factors affecting foreign direct investment indeveloping countries, and institutional changes in agrarian societies He is

a member of a number of professional organizations, has served as refereefor journals on Islamic economics and finance, and is a member of the

Advisory Board for the International Journal of Islamic Financial Services.

Jakob de Haan is Professor of Political Economy, University of Groningen,

The Netherlands He is also Scientific Director of SOM (Systems,Organization and Management, the research school of the faculties ofManagement and Organization, Economics, and Spatial Sciences of theUniversity of Groningen) He graduated from the University ofGroningen, where he gained his PhD He has published extensively onissues such as public debt, monetary policy, central bank independence,political and economic freedom and European integration His most recent

book is European Monetary and Fiscal Policy (jointly written with Sylvester

Eijffinger) (Oxford University Press, 2000) He is also on the editorial

boards of Public Choice and the European Journal of Political Economy.

Jean Dermine holds a Docteur ès Sciences Economiques from the Catholic

University of Louvain and Master of Business Administration fromCornell University, and is Professor of Banking and Finance and Director

of the Centre for International Financial Services at INSEAD (theEuropean Institute for Business Administration) Author of numerous arti-cles on asset-liability management, European financial markets and thetheory of banking, Jean Dermine has published four books and has had

various research papers published in the Journal of Financial mediation, the Journal of Money, Credit, and Banking, and the Journal of Banking and Finance, as well as in other academic and professional jour-

Inter-nals Laureate of the 1997 European Investment Bank (EIB) Prize for his

essay ‘Eurobanking, a New World’, he is co-author of ALCO Challenge, acomputer-based training simulation used in Europe, the Americas andAsia Jean Dermine has been Visiting Professor at the Wharton School ofthe University of Pennsylvania, at the universities of Louvain andLausanne, a Salomon Center Visiting Fellow at New York University, and

a Danielsson Foundation Guest Professor of Bank Management at theGöteborg and Stockholm Schools of Economics

Kevin Dowd is Professor of Financial Risk Management at Nottingham

University Business School, UK He previously worked for the OntarioEconomic Council, the University of Sheffield, and Sheffield HallamUniversity His main research interests are in the areas of financial andmonetary economics and, in particular, free banking and financial risk

management His most recent book was Money and the Market: Essays in Free Banking (Routledge, 2000).

Leigh Drake is Professor of Monetary Economics in the Economics

Department at Loughborough University, UK and is Deputy Director of

the Loughborough University Banking Centre He is the author of The Building Society Industry in Transition (Macmillan, 1989) and has pub-

lished widely in the areas of money and banking in journals such as: the

Economic Journal; Review of Economics and Statistics; the Journal of Money, Credit and Banking; Oxford Economic Papers; Financial Stability Review; Manchester School; and Applied Financial Economics His main

research interests in the field of banking include: costs and efficiency inbanking; delivery channels and the pricing of bank services He has acted

as a consultant to a number of leading banks and building societies

Jürgen Eichberger is Professor of Economics at the University of

Heidelberg in Germany He obtained his degrees (Diplom-Volkswirt, Dr.rer pol.) from the University of Mannheim in Germany For more than tenyears, he taught at the University of Western Ontario in Canada, theAustralian National University in Canberra and the University ofMelbourne in Australia In 1995, he returned to Germany and took up achair at the University of Saarland His research interests are focused ondecision making under uncertainty, game theory and financial economics.His papers have appeared in major economic journals, and he has pub-lished several books

Ayse G Eren graduated in economics and management from CardiffBusiness School, University of Wales, Cardiff in 1991 She went on toreceive her MSc in international economics, banking and finance from the

same university in 1993 She then joined the National Westminster Bankwhere she worked as a specialist in international trade finance until the end

of 1999 Currently, she works as a Senior Relationship Manager at theDevelopment Bank of Singapore, in London, with portfolio responsibilityfor a range of large corporate clients trading internationally Since hergraduate days, she has continued to contribute to the economics andfinance literature

Falko Fecht obtained a Masters degree in economics from the University of

Frankfurt, Germany, in 1997, and thereafter worked in the EconomicsDepartment of the BHF-Bank In 1998, he took up a position as ResearchAssistant at the Economics and Business Administration Faculty of hisAlma Mater Since October 2000, he has been working with the EconomicsDepartment at the Deutsche Bundesbank, in Frankfurt am Main, Germany

Justin G Fung is an Associate in the Melbourne office of The BostonConsulting Group He specializes in corporate strategy, financial servicesand telecommunications He has published peer-reviewed papers on avariety of subjects, including hospital network costs, patents and competi-tion law and Chinese constitutional law Prior to joining The BostonConsulting Group, he was a Research Fellow with the Department ofEconomics at the University of Melbourne and a Senior Research Assistant

in the Centre of International Finance at the Melbourne Business School

Edward P.M Gardener is Director of the School for Business and Regional

Development (SBARD) at the University of Wales, Bangor ProfessorGardener has published over 200 articles and papers on banking topics His

most recent books (co-authored) include Investment Banking: Theory and

Strategic Challenges in European Banking (Macmillan, 2000) and Bank Strategies and Challenges in the New Europe (Palgrave, 2001) During

1995/96 he co-directed (with economists from Cambridge University) amajor EC DG XV project (published by Kogan Page, 1997) on the impact

of the European Single Market on the EU credit institutions and banking.Since then he has conducted project research for the World Bank and co-directed (with Cambridge economists) a major banking project input to the

HM Treasury Cruickshank Review of Banking Services in the UK

Ian R Harper is Professorial Fellow in the Melbourne Business School

at the University of Melbourne, Australia From 1993 to 1997, he heldthe Ian Potter Chair of International Finance in the School His research

interest lies in the field of financial intermediation His publicationsinclude policy-orientated papers on a variety of subjects, including the

effects of financial deregulation, the economics of saving, bank sion, mergers in the financial sector and the role of superannuation He

supervi-is co-author with Jürgen Eichberger of a graduate text on financial nomics published by Oxford University Press Prior to joiningMelbourne Business School, he was Professor of Monetary andFinancial Economics at the University of Melbourne He has also heldpositions at the Australian National University in Canberra, PrincetonUniversity in the United States and the Reserve Bank of Australia inSydney

eco-Shelagh He ffernan, BA (Toronto), MPhil (Oxon), DPhil (Oxon) is

Professor of Banking and Finance at Cass Business School, CityUniversity, London She was a Commonwealth Scholar at Oxford and hasbeen a visiting professor at several Canadian universities Grants forresearch in banking include Leverhulme and HM Treasury Books include

Sovereign Risk Analysis (Unwin Hyman, 1986), Modern International Economics (co-authored with Peter Sinclair) (Blackwell, 1990), and Modern Banking in Theory and Practice (Wiley, 1996); the last book is also

published in Chinese, and a new edition is forthcoming Her research ests include competition in the financial sector, the causes of bank failure,financial regulation, e-cash and the performance of mutual funds She has

inter-published widely in journals, including the Journal of Banking and Finance, Economica, the Journal of Money, Credit, and Banking and the Journal of Financial Services Research, with a number of entries in the International Encyclopedia of Business & Management.

Niels Hermes is Associate Professor at the Department of Management

and Organization of the University of Groningen, The Netherlands Hisfields of specialization include development economics, internationalfinance and monetary economics He has published on issues such asfinance and development, investment and finance, capital flight, and

exchange rate systems in the Journal of International Money and Finance, the Journal of Banking and Finance, and the Journal of Development Studies, among others He has also co-edited two books.

Gerhard Illing is Professor of Macroeconomics in the Department of

Economics at the University of Munich He obtained an MPhil from theUniversity of Cambridge (DAAD scholarship) in 1981, followed by a PhD(Dr rer pol.) from the Economics Faculty of the University of Munich, in

1984, after completing a thesis on ‘Money and asymmetric information’

During 1987–92, he was an Assistant Professor at the Economics Faculty

of the University of Munich, during which time he completed hisHabilitation (1992: Heisenberg Scholarship) He was also Professor ofEconomics at the University of Bamberg in 1993–95 and Professor inEconomic Theory at the Goethe University Frankfurt in 1995–2001, beforetaking up his current position He has held visiting professorships at theUniversity of Western Ontario (1986/87; 1998); the University ofPittsburgh Center for Economic Research and Graduate Education(CERGE) in Prague (1992); the University of Freiberg (1991/92); and theFern Universität Hagen (1994/95) He has published widely in manyleading journals, in the area of applications of game theory to monetarytheory and policy

Joachim Keller is an economist at the research centre of the Deutsche

Bundesbank, where he works on the development of new financial tors Prior to joining the Bundesbank he was a student of economics at theUniversity of Pisa, Italy and at the University of Saarland, Germany,where he graduated as an economist in 1995 and where he is completing histhesis ‘The effect of new information on the exchange rate’ under the super-vision of Professor Richter His research interests lie in the field of mone-tary and international economics as well as banking and finance

indica-Sarkis Joseph Khoury is Professor of Finance and International Finance

and Executive Director of the Foundation for Research in InternationalBanking and Finance at the University of California-Riverside He is alsoeditor, associate editor and reviewer for many academic journals He is also

a member of the Board of Directors of the Philadelphia Board of Trade

Dr Khoury has authored or edited 22 books and monographs dealing withinternational banking, international finance, mergers and acquisitions, thestock markets and other investment vehicles His numerous articles haveappeared in some of the leading journals in their field He has lectured allover the world on a wide range of financial issues, and has served as aconsultant to corporations, individuals and academic institutions DrKhoury gained his PhD from the Wharton School of the University ofPennsylvania

Robert Lensink is Professor of Finance at the Faculty of Economics,

University of Groningen, The Netherlands He is also an External Fellow

of the Centre for Research in International Trade and Development(CREDIT) at the University of Nottingham, UK His main fields of inter-est are finance and development, and firm-level investment He has pub-lished widely on these issues, both in international journals and in books

His most recent book, co-authored with Hong Bo and Elmer Sterken, is

Investment, Capital Market Imperfections and Uncertainty: Theory and Empirical Results (Edward Elgar, 2001).

David T Llewellyn is Professor of Money and Banking at Loughborough

University, UK, and Chairman of the Loughborough University BankingCentre He has formerly held positions at Unilever (Rotterdam), HMTreasury (London), the University of Nottingham, and the InternationalMonetary Fund (Washington) He has been a Public Interest Director ofthe Personal Investment Authority (London) and has served as a consul-tant to banks and regulatory agencies in several countries His mainresearch interests are in the analysis of financial systems, the theory andpractice of bank behaviour, the causes of banking crises and the theory andpractice offinancial regulation Recent books include: The New Economics

of Banking (SUERF, 1999) and Financial Regulation: Why, How and Where Now? (with Charles Goodhart) (Routledge, 1998) The chapter in this book

is based on a project undertaken for De Nederlandsche Bank on the latory implications of banking crises In 2000, he was elected President ofthe Société Universitaire Européenne de Recherches Financières(SUERF)

regu-Ian W Marsh holds degrees from Sheffield, London (Birkbeck) and

Strathclyde Universities He is a senior lecturer in finance at Cass BusinessSchool and a research affiliate at the Centre for Economic Policy Research

He previously taught at Strathclyde University and has held visiting tions at the universities of Malta, Bolzano and Palermo He has recent pub-

posi-lications in the Journal of Monetary Economics, the Review of Economics and Statistics and the Journal of International Money and Finance, and is co-author of Exchange Rate Modelling (Kluwer, 1999).

Kent Matthews is the Sir Julian Hodge Professor of Banking and Finance,

Cardiff University, UK He took degrees at the London School ofEconomics, Birkbeck College, and the University of Liverpool He has heldresearch and academic appointments at the London School of Economics,the National Institute of Economic & Social Research, the University ofLiverpool, the University of Leuven (Belgium), the University of Clemson(USA), the University of Western Ontario (Canada), Liverpool BusinessSchool and Humbolt University (Berlin) He has held professionalappointments at the Bank of England and Lombard Street Research Ltd

He was the principal forecaster for the Liverpool Macroeconomic ResearchGroup between 1980 and 1989 His research interests cover credit marketderegulation, macroeconomic forecasting and aspects of tax evasion and

the black economy He is the author and co-author of eight books, over 40articles in scholarly journals and edited works, and over 30 articles in pro-fessional and popular journals.

Alistair Milne is senior lecturer in banking and finance at Cass BusinessSchool in London Previously he has been an economic adviser to theFinancial Intermediaries Division of the Bank of England, lecturer in eco-nomics at the University of Surrey, a research fellow at the LondonBusiness School, and has worked for HM Treasury and the Government ofMalawi He holds a PhD from the London School of Ecnomics, for aneconometric thesis on the determinants of inventory investment, and haspublished papers on a range of academic and policy topics He is coursedirector of the School’s MSc in banking and international finance and isconducting research on: banking competition, especially in the area ofsecurities processing and payment systems; bank capital management andbank regulation; and the impact of capital market frictions on firm andhousehold behaviour and the business cycle

Philip Molyneux is currently Professor in Banking and Finance and

Director of the Institute of European Finance at the University of Wales,Bangor He also holds the Special Chair of Financial Services andFinancial Conglomerates at Erasmus University, Rotterdam, TheNetherlands His main area of research is on the structure and efficiency ofbanking markets and he has published widely in this area, including recent

publications in: the Journal of Banking and Finance, the Journal of Money, Credit, and Banking, Economica, Economics Letters, the Journal of Post- Keynesian Economics and Applied Economics He has authored, co- authored and edited a variety of books, including Efficiency in European Banking (John Wiley, 1996), Private Banking (Euromoney, 1996), Investment Banking in Europe (Euromoney, 1996), German Banking (Financial Times, 1996), Bancassurance (Macmillan, 1998), Financial Innovation (John Wiley, 1999), European Savings Banks – Coming of Age? (Lafferty, 1999) and the latest, European Banking: Efficiency, Technology and Growth (John Wiley, 2001).

Andrew W Mullineux is Professor of Global Finance and Director of the

Global Finance (Research) Group and the MBA (International Bankingand Finance) Programme in the Birmingham Business School at theUniversity of Birmingham, UK He graduated in 1973 with a first classdegree in economics and was awarded a Masters in econometrics and math-ematical economics by the London School of Economics and PoliticalScience in 1976 He completed his PhD on business cycles in January 1983

After working for five years as a Lecturer in Economics in the BusinessStudies Department at Liverpool Polytechnic (now John MooresUniversity) he moved to a research post in the Department of Economics

at the University of Birmingham, where he was subsequently employed(apart from spending the 1988/89 academic year at the Cardiff BusinessSchool) as Lecturer, Senior Lecturer and Professor of Money and Banking

On 1 May 2001, he moved to the Birmingham Business School to take uphis current position Mullineux has published numerous books and articles

in refereed academic and professional journals He is currently Recorder ofSection F (Economics) of the British Association for the Advancement

of Science and Managing Editor of the 23rd (October 2001, Brussels)Société Universitaire Européenne de Recherches Financières (SUERF)Colloquium proceedings

Victor Murinde is Professor of Finance as well as Director of the Corporate

Finance Research Group at the University of Birmingham, UK, andHallsworth Senior Research Fellow at the Institute of Development Policyand Management, University of Manchester He completed his PhD inEconomics at Cardiff Business School, University of Wales, Cardiff, in

1990 Thereafter he held positions as Lecturer in Banking at CardiffBusiness School, Senior Lecturer in Finance and later Reader inDevelopment Finance at the University of Birmingham He has alsoworked as a consultant to the World Bank, the United Nations andUNCTAD (United Nations Conference on Trade and Development) aswell as to a number of banks, private companies and governments in devel-oping and transition economies Professor Murinde has published over 40

articles in many journals, including the Journal of Banking and Finance, Journal of International Money and Finance, Review of International Economics, Emerging Markets Review, Manchester School, Journal of Policy Modelling, World Development, Economic Notes, Applied Economics and Applied Financial Economics His research interests cover corporate

finance issues in emerging financial markets, development and tional banking, and flow of funds approach to macroeconomic policy mod-elling

interna-Joseph J Norton is the James L Walsh Distinguished Faculty Fellow in

Financial Institutions Law and Professor of Law, Southern MethodistUniversity School of Law, Dallas and (dual appointment) Sir JohnLubbock Professor of Banking Law at the Centre for Commercial LawStudies, University of London He currently holds professional positions

in banking/financial law in London, the USA and Hong Kong He is sidered one of the leading law experts in international banking and

con-financial law and in finance sector law reform matters He has publishedover 35 books and over 120 articles on related subjects, and has lectured onbanking and fiance law worldwide He has practical experience with inter-national and domestic (US) banking and capital markets transactions,international financial regulatory matters, bank corporate and assetrestructuring and asset securitization He is a Senior Research Fellow at theInstitute of European Finance (UK) Professor Norton is the ExecutiveDirector of the London Institute of International Banking, Finance andDevelopment Law, of the London Forum for International Economic Lawand Development and of the Centre for Financial Studies and the Rule ofLaw (BIICL-London) He currently is actively engaged in emergingfinancial sector reform consultancies in Africa, South America, Centraland Eastern Europe, and East Asia.

C Charles Okeahalam obtained a PhD in economics from the University

of London in 1991 Since 1999 he has been a professor at the University ofthe Witwatersrand, South Africa, where he has held the Donald GordonChair in Banking and Finance in the Graduate School of BusinessAdministration (1999–2000) and since 2000, the Liberty Life Chair inFinance and Investment in the Department of Business Economics He hasworked as an investment analyst and served as an adviser to a number ofcentral and commercial banks During 1999–2000 he led the design, devel-opment and implementation process for the establishment of the SouthAfrica Deposit Insurance System

Christopher D Olive gained a degree in business administration (finance)

from the University of Miami, Florida, a J.D from the Southern MethodistUniversity School of Law and an LL.M (banking and finance law) fromthe University of London He is an Associate, Lending/Structured FinanceGroup, Jones, Day, Reavis and Pogue, Dallas, Texas; Adjunct Lecturer inLaw, Southern Methodist University School of Law; and Fellow,International Banking and Finance Law Unit, Queen Mary and WestfieldCollege, University of London Christopher Olive’s experience includeslending and structured finance and transactions and financial products,including syndicated loan transactions, project, acquisition, aircraft,venture capital and real estate finance and debt securities transactions, syn-thetic leasing and securitization transactions, structured derivatives trans-actions, bankruptcy finance and restructuring transactions, and bankingand securities regulatory matters

Kate Phylaktis is Head of the Department of Banking and Finance,

Professor of International Finance and Director of the Emerging Markets

Group at Cass Business School in London She has published extensively

in the fields of foreign exchange markets, financial markets and financialstructures with specific reference to emerging markets She has written three

books: Financial Data of Banks and Other Institutions (Pergamon, 1987); International Finance and the Less Developing Countries (Macmillan, 1990); and The Banking System of Cyprus: Past, Present and Future (Macmillan, 1995) She is an associate editor of Emerging Markets Review and the Greek Economic Review She has acted as a consultant to various companies and

public bodies, including the Research Department of the InternationalMonetary Fund, the Commonwealth Secretariat, the Cyprus PopularBank, the Bank of Cyprus, the Ministry of Education of Greece and theMinistry of Education and Culture of Cyprus, and is a member of theExport Guarantees Advisory Council

Adisorn Pinijkulviwat gained a BA in economics at Thammasat University

(Bangkok) and an MBA in international banking and finance from theUniversity of Birmingham, UK He began his career as an assistant analyst

in the Department of Bank Examination and Analysis, Bank of Thailand,

in 1975 At present, he is a Chief Officer in the Department of Examinationand Supervision

John R Presley has been Professor of Economics in the Department of

Economics, Loughborough University, UK, since 1984 He was Head ofDepartment, 1991–96, and Director of the Banking Centre, 1984–89 He isthe author of 15 books on European monetary union, the history of eco-nomics, banking in the Arab Gulf and Islamic finance Since 1991 he hasbeen an adviser to the Department of Trade and Industry on Middle EastTrade He is now adviser to Saudi British Bank and a Director of the ArabBritish Chamber of Commerce as well as Associate Director, MaxwellStamp plc He has published articles in most leading economics journalsand writes regularly for professional magazines, mainly about the MiddleEast He has been an adviser to the Saudi Arabian government (1978–79),visiting professor, Harvard University, and has been an adviser for manyinternational organizations and companies, including the InternationalMonetary Fund, the World Bank, HSBC and British Aerospace plc

Cillian Ryan is Director of the University of Birmingham Jean Monnet

European Centre of Excellence, and holder of the Jean Monnet Chair inEuropean Economics A graduate of University College, Dublin, hereceived his PhD from the University of Western Ontario He has been anadviser to various governments on a wide range of trade policy issues,including the North American Free Trade Agreement (NAFTA), the

Uruguay Round, the European ‘1992’ Single Market programme and morerecently on financial services, the General Agreement on Trade in Services(GATS) and the World Trade Organization In addition to the UK, he hasheld lecturing appointments in Ireland, Canada, the United States,Singapore, France and Hong Kong.

Ingo Walter is the Charles Simon Professor of Applied Financial

Economics and the Sidney Homer Director of the New York UniversitySalomon Center at the Stern School of Business, New York University

He graduated with an AB in economics (summa cum laude) from LehighUniversity in 1962, an MS in business economics from the same univer-sity in 1963, and a PhD in economics from New York University in 1966.After working as Assistant Professor of Economics (1965–68) andAssociate Professor of Economics (1968–70) at the University ofMissouri-St Louis, he became Senior Fellow at the Center forInternational Studies, New York University (1970–73), before taking uphis current Chair at the Stern School of Business He has authored manyleading books and has contributed numerous papers to edited mono-graphs, in addition to publishing widely in many top journals in the area

of international banking

Warrick Ward gained a BSc in economics and accounting from the

University of the West Indies (Cave Hill), and an MSc in internationalbanking and financial studies from the University of Southampton, UK

He is currently employed at the Central Bank of Barbados as a BankingAnalyst in the Governor’s Office Prior to this he has held positions in theBank Supervision Department and in the Research Department, where heserved as an economist He has served on a number of committees, one ofwhich was mandated to provide input for the enactment of the ElectronicTransactions Bill (2000) He is also the Chairman of the Central Bank’sE-Banking Committee, and a member of its Investment Committee MrWard has written on a number of topics, including e-banking, life insur-ance, trade issues, as well as macro-prudential and regulatory topics

Jonathan Williams is a lecturer in banking and finance at the University of

Wales, Bangor His main research interests lie in the area of bank efficiencyand organizational structure with particular emphasis on the Europeansavings banks industry He is also interested in the relationship betweenfinancial liberalization and banking sector efficiency in developing coun-tries and is the author of about 50 articles, books and publications on thefinancial system As part of the banking research team at Bangor he hascontributed to several major studies, including ‘Credit Institutions and

Banking’, commissioned by the European Commission as part of its SingleMarket Review initiative, and the recent Cruickshank Review of UKBanking Services A lecturer at undergraduate and postgraduate levels, he

is responsible for delivering modules in the areas of international banking,banking and development, and comparative banking

Simon Wolfe is a lecturer in finance at the University of Southampton, UK.

His research interests include asset-backed securitization, long-run mance of convertible bond issuers, financial regulations and Islamic

perfor-banking His publications have appeared in such journals as the European Journal of Finance, the Journal of Fixed Income and the Journal of Financial Regulation and Compliance Dr Wolfe has also contributed to books, for example, The European Equity Markets: The State of the Union and an Agenda for the Millennium (edited by Benn Steil) (Royal Institute of

International Affairs, 1996)

Geo ffrey E Wood is currently Professor of Economics at City University

London He has also taught at the University of Warwick, UK, and hasbeen with the research staff of both the Bank of England and the FederalReserve Bank of St Louis He is the co-author or co-editor of ten books,which deal with, among other subjects, finance of international trade,monetary policy and bank regulation Among his professional papers arestudies of exchange rate behaviour, interest rate determination, monetaryunions, tariff policy and bank regulation He has also acted as an adviser

to the New Zealand Treasury He is a Managing Trustee of the Institute ofEconomic Affairs and of the Wincott Foundation in London

Chunsheng Zhou has been an assistant professor of the University of

California at Riverside (UCR), an honorary associate professor of theUniversity of Hong Kong, and a full professor of the Guanghua School ofManagement, Peking University, Beijing He has published a number ofresearch articles in leading economics and finance journals and has madenumerous presentations to academic researchers, business managers, andfinancial practitioners, in the United States, Europe, Hong Kong andMainland China Dr Zhou has also served as a financial economist in theUnited States Federal Reserve Board in Washington, DC In addition, hehas served as an economist, consultant and adviser to a number of gov-ernment agencies, banks and hi-tech companies He gained his Mastersdegree in mathematics from Peking University and a PhD in financial eco-nomics from Princeton University

Andrew W Mullineux and Victor Murinde

The ‘internationalization’ of banking, which started in the early 1970s,paved the way for the ‘globalization’ offinance and became more and moreevident during the 1990s as international capital flows increased in magni-tude The internationalization and globalization processes have been facil-itated by the ongoing communications and information technology (C&IT)revolution and capital flows have increasingly responded to economic andpolitical news This has created the potential for increased global financial,and consequent economic, instability, of which the 1997/98 Asian financialcrisis might only be a precursor

By allowing countries, whether they are developed, developing, in sition or emerging market economies, to draw on a global capital pool tofinance investment, rather than rely entirely on domestically generatedsavings, a globalized financial system provides great opportunities as well

tran-as the aforementioned threat of instability

The ultimate objective of the monetary authorities must thus be to create

a new ‘global financial architecture’, which ensures that capital flows freely

to those who will make the best use of it to enhance the well-being ofmankind To achieve this, risks and benefits (pecuniary and social) anddisbenefits (for example, poverty and environmental degradation) must beaccurately priced and measured and a regulatory and supervisory systemmust be put in place to assure price stability without distorting the pricemechanism Much work needs to be done to achieve such a utopia, butgood progress is being made on risk, environmental and poverty impactmeasurement and on the regulatory and supervisory front Good gover-nance at the international, state and corporate levels is of course essentialfor the successful conclusion of this global project

The aim of the Handbook of International Banking is to provide a clearly

accessible source of reference material, covering the main developmentsthat explain how the internationalization and globalization of banking hasprogressed over recent decades to its current juncture and to appraiseprogress with the creation of a new global financial architecture TheHandbook is the first of its kind in the area of international banking.The chapters contained in the volume have been written by leading

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specialists in their respective fields, often with remarkable experience inacademia and/or professional practice, and have been grouped into fourparts Part I includes chapters dealing with the internationalization andglobalization of banking Part II groups chapters covering structural devel-opments in the international banking industry The chapters in Part IIItackle regulatory and supervisory issues relating to international banking,while the chapters in Part IV assess progress towards the development of anew ‘global financial architecture’.

The material is provided mainly in the form of self-contained surveys,which trace the main developments in a well-defined topic, together withspecific reference to the relevant frontier research output as contained inrecent journal articles and working papers Some contributions, however,aim to disseminate new empirical findings especially where competingparadigms are evaluated

The Handbook is designed to serve as a source of supplementary readingand inspiration for a range of courses in banking and finance, including:post-experience and in-house programmes for bankers and other financialservice practitioners; Masters and MBA programmes with courses in inter-national banking and finance; and also for practitioners, professionalresearchers and academics in the field

The editors (Andrew Mullineux and Victor Murinde) would like to takethis opportunity to thank the following people for helping us to bring thisproject to its successful conclusion: the contributing authors, for the highquality of their chapters; Margaret Ball and Jayne Close, for their excellentsecretarial support in helping us to produce the typescript; and EdwardElgar, Alex Minton, Karen McCarthy and their colleagues, for all theirencouragement and assistance in helping us produce this Handbook Weall hope that its readers find it useful!

The Globalization of Banking

1 Globalization and convergence of banking systems

Andrew W Mullineux and Victor Murinde

The single global banking space is almost a reality Nine years ago, analystsnamed 17 banks that they believed were global banks of the future All werecommercial or universal banks In a 1998 survey, about the only similarity

is the number: analysts still envisage 17 banks as ‘global’, or with ‘globalpotential’, but they describe a very different grouping Given the changes

in banking topography, today’s analysts include more investment thancommercial banks in the top ranks (see Kahn, 1998) Just as striking, thefirst two tiers in 1998 are the exclusive realms of US banks Today’s candi-dates as global banks of the new millennium include Merrill Lynch,Morgan Stanley Dean Witter, Goldman Sachs, J.P Morgan, Citibank,Chase Manhattan and Deutsche Bank

During 1999, four banks stood head and shoulders above the rest asglobal banks: the best global wholesale bank was Chase Manhattan; thebest global transaction services bank, and the best global consumer bankwas Citigroup; the best global asset management bank was MerrillLynch; and the best global private bank was Crédit Suisse PrivateBanking These banks, no longer content to rule the domestic roost, arejoined by an unprecedented number of financial institutions steppingoutside their countries’ borders to attain true global reach It seemsglobal reach, perhaps by making overseas acquisitions, is the cleareststrategy for independent survival Alongside the expansion of conven-tional banks, the last two decades have seen the birth and growth ofIslamic banks, which rely on profit and loss sharing rather than the con-ventional interest rate yardstick to price their operations; see, amongothers, Murinde et al (1995), Murinde and Naser (1998), Al-Deehani et

al (1999)

The indications are that financial globalization is broadly beneficial tothe world economy (Thiessen, 1998; Murinde, 1996) International finan-cial markets can facilitate access by borrowers to a larger pool of global

3

savings and enhance investment opportunities for savers worldwide Whileinternational capital flows have at times disrupted national financialmarkets, such episodes more often than not were caused by unsustainabledomestic policies and pointed to the need for adjustment In view of theoverall benefits of greater access to global capital markets, it would notserve us well to restrict the free flow of funds The best way to maximize thebenefits of financial globalization and reduce the risks of disruptions tonational macroeconomic policies is to ensure that these markets and flowsare sound and sustainable Financial systems need to be prudentlymanaged and supervised – both nationally and internationally The bestpolicy, therefore, is to support and contribute to global initiatives designed

to promote financial market stability worldwide

In addition, the globalization of financial markets and the development

of strategic alliances in regional markets have broadened the horizon formany investors For example, investment in private capital assets has grownrapidly as investors further diversify portfolios in order to reduce risk andincrease returns In Latin America, for example, growing participation byforeign institutional investors has been a key force in the development ofLatin American stock markets since 1990 while accelerating trends of insti-tutionalization and globalization of money management have increased theimportance of these investors for the future development of stock markets

in emerging economies (Hargis, 1998) There have been some considerableinteractions between globalization and institutionalization of money man-agement and the growth of emerging stock markets in Latin America, andelsewhere

Small, open, developing countries with fragile banking systems havelittle to lose from globalization and much to gain, provided that globaliza-tion is accompanied by policy changes in several areas First, transactioncosts in the banking sector need to be reduced Second,fiscal policy willhave to shift towards the provision of infrastructure and education toprevent local capital from being moved to other countries Third, a furtherreduction in foreign trade barriers would improve resource allocation andincrease competition

Knight (1999) argues that the increase in financial globalization and therise in cross-border financial flows that represents the globalizationprocess could lead, over time, to a more efficient worldwide allocation ofsavings than was possible in the past Indeed, the new and growing linksbetween emerging and developed financial markets have been reflected in

a spectacular increase in financial flows to developing and transition tries It is argued that to benefit fully from their growing access to interna-tional financing, the developing and transition economies need tostrengthen their financial systems Moreover, given the extremely low level

coun-of domestic saving, many developing countries have no option other than

to participate actively in the process of financial globalization Only byparticipating in the global market will it be possible for the country to

share in the surplus savings of the more mature economies ( pace the US)

of the world

However, some practical outcomes have the potential to delay theprocess of globalization (Aybar and Milman, 1999) For example, therecent experiences in South East Asia, Russia and Latin Americaprovide ample evidence that countries in the process of integration areincreasingly exposed to internal and external economic shocks Thegrowing vulnerability of developing economies in particular has thepotential to undermine decades of development effort In this context,the Asian crisis clearly demonstrates that we are increasingly unable topredict the triggers of such crises, and certainly lack the institutionalarrangements to contain them Hence, the ability to manage the interac-tion between domestic and international economic forces is limited orundermined by certain factors; these have the potential to delay theprocess of globalization and integration of developing economies intothe world economy

Moreover, the recent financial crisis has demonstrated that, through theprocess of globalization, the financial world has shrunk (Mahbubani,1999) The financial crisis started in a small, open, developing country inSouth East Asia (Thailand) and spread through East Asia and on toRussia, Latin America and the developed countries

Clearly, globalization of finance will engender worldwide, rather thanlocal, competition In this context, the banking industry should anticipatethat the twenty-first century will present it with a considerably more vola-tile landscape than it faced in the twentieth century (Ludwig, 1999) First,

it is expected that computer technology will give financial institutions theability to analyse market changes more quickly and the ability to react tothose changes more quickly Second, advances in communications technol-ogy will transmit market developments more quickly

This chapter surveys trends in the globalization of banking, focusing marily on the evolving role of banks and other financial institutions in cor-porate governance In what follows, the remainder of the chapter isstructured into four sections Section 2 examines issues surrounding inter-nationalization, securitization and derivatization Financial system conver-gence and the issue of banks versus capital markets are discussed in Section

pri-3 Globalization, in the context of the World Trade Organization (WTO)and the General Agreement on Trade in Services (GATS), is discussed inSection 4 Section 5 examines the trends in corporate governance Section

6 concludes by looking into the future

2 INTERNATIONALIZATION, SECURITIZATION AND DERIVATIZATION

In the last three decades, there has been substantial liberalization of thebanking sector and financial innovation These changes have been facili-tated by reregulation of banks, which continue to lie at the heart of allfinancial systems, and have themselves driven changes in prudential, andmonetary, regulation policy The general trend has been away from pro-scriptive regulation of financial activities, quantitative control of banklending in total (in pursuit of monetary control) and to sectors of theeconomy (in pursuit of development policy), and qualitative controls andguidance; see Hermes et al (1998, 2000) Quantitative and qualitative con-trols and guidance have been largely replaced in many countries with a price(interest rate) orientated monetary policy and general regulations Thelatter include: risk-related capital adequacy requirements (CARs); depositinsurance schemes (also risk related in the US); rules prohibiting over-exposure (to individuals, sectors of the economy, or foreign exchange risk);and rules requiring the holding of adequate reserves to assure liquidity and

to make provisions against bad or doubtful debts To enhance supervision

by the authorities, confidential disclosure rules are enforced; and to tate monitoring by equity and bond holders, public disclosure and auditingrequirements are imposed Finally, to aid comparison in the increasinglyglobal environment, accounting and disclosure rules are in the process ofbeing harmonized and country-based supervisors are increasingly sharinginformation about banks and other financial firms The general trend istowards establishing a set of rules that encourage banks and other finan-cial institutions to manage their asset and liability portfolio risks effectively

facili-If banks achieve an appropriate balance between risk and return, thendepositors will be protected while shareholders earn a suitable return; sys-temic risk, the risk of destabilizing crises in the whole banking system, will

be minimized, and capital will be more efficiently allocated

The banking and wider financial markets are rapidly being ‘globalized’.The process started in the 1970s with the internationalization of banking(Pecchioli, 1983) This was followed by a period of rapid innovation in thecapital markets, often dubbed ‘securitization’, in the 1980s Securitizationinvolves both disintermediation, the growth of non-bank-intermediated ordirect (from the capital markets) finance, and a process of ‘making loanstradable’ on securities markets, or using asset-backed securities The secur-itization process has continued into the 1990s, and has been enhanced bythe rapid growth in the use offinancial derivatives or ‘derivatization’.Also, in the 1990s, there has been a progressive relaxation of capital con-trols Some countries moved earlier than others, for example, the UK in

1979, but relaxation of capital controls has been increasingly encouraged

by the International Monetary Fund (IMF) as a means of stimulatinginward portfolio and direct (in plant and machinery and so on) investment

to facilitate economic development The result has been a rapid growth inoverseas portfolio investments by mutual, insurance and pensions funds,with UK and US institutional investors playing a prominent role Further,the conclusion of the GATS agreement relating to financial services in themid-1990s encourages the opening offinancial sectors in countries aroundthe world to entry by foreign financial institutions Progress with Europeanfinancial integration, which has culminated in the European MonetaryUnion (EMU) and the creation of ‘Euroland’, is encouraging more cross-border activity in the financial service sector, including bank branching andcross-border alliances and mergers The merger activity in Europe to datehas, however, largely entailed intranational consolidation; leading togreater concentration in national banking systems, but these have increas-ingly faced greater competition from abroad The US is probably experi-encing the most rapid consolidation, but this is hardly surprising given thehighly fragmented banking system it had at the beginning of the 1990s due

to strict branching restrictions At the end of the 1990s, consolidation alsobegan in Japan’s banking and wider financial system

The picture seems to be one of the evolution of global banks competing

on a global stage This is most advanced in the investment banking sphere,but is likely to become increasingly evident as a result of the ‘internet rev-olution’ Banks can now offer services across borders without a branchnetwork Entry is thus much easier and competition is consequently gettingintense Retail banks, engaged primarily in deposit banking, the provision

of payments services and lending, face competition on both sides of thebalance sheet and in service provision Competition in the provision ofloans (home, car and so on), including that from credit card companies, isclearly increasing There is also growing competition in the savings marketfrom internet-based ‘banks’, mutual funds, and the providers of longer-term savings investments, especially pension providers The big banks havealso seen their share of the supply of debt finance to the larger firms decline

as they switch increasingly to direct finance from the capital (bonds) andmoney (commercial paper) markets Increasingly, ‘commercial’ or retailbanks are left supplying commercial loans to small and medium-sizedenterprises (SMEs) Competition in SME financing is, however, alsohotting up in the US as the big banks attempt to ‘cherry pick’ using mail-shots based on the analyses of their growing databases

Banks have been forced to refocus their businesses Many retail-basedbanks have diversified into investment banking in order to help their largecorporate clients access the money and capital markets In so doing they

have boosted their (‘broking’ and ‘market making’) fee income to pensate for the lost interest-based earnings from the loans they used tomake The combination of investment and retail banking is sometimescalled ‘universal banking’ This has long been permitted in parts ofEurope, but was not the custom in the UK (or France before the mid-1960s) and was prohibited in the US post-1933, and in post-war Japan.Japan is in the process of relaxing the restrictions imposed by the USadministration after the Second World War, and the US has recentlyrepealed the 1933 Glass–Steagall Act restrictions considerably Universalbanking has long been the norm in Germany and Switzerland, forexample In Germany, however, universal banks commonly hold sizeableshareholdings in non-financial firms Cross-shareholding between

com-Japanese ‘city banks’ and other ‘keiretsu’ member firms are also cant, and cross-shareholding between banks, insurance companies andnon-financial firms is also common in France and Italy, for example EUbanking regulations limit the proportion of a bank’s capital that can beheld as shareholdings in non-financial companies and the current trend is

signifi-to reduce cross-shareholdings, which raises a number of issues for petition and prudential regulation policy (should banks own non-banksand vice versa?) There are also competition and corporate governanceissues and these have come to the fore in the 1990s, leading to pressure onbanks to reduce their shareholdings in non-financial firms The pruden-tial concerns about non-financial firms owning banks relate to the risk ofthe owning firms exploiting banking depositors by forcing banks tosupply cheap finance and the risk that the owning firms might be broughtinto the lender-of-last-resort and ‘too big to be allowed to fail’ safety nets.This might also be true in cases where banks own non-financial firms,whose failure would undermine the banks

com-It should also be noted that although financial conglomeration is ing the norm in most national systems, especially among Organization forEconomic Cooperation and Development (OECD) countries, there are twoapproaches to corporate structuring The integrated firm approach hasbeen common in mainland Europe, while the UK has tended to favour aholding company approach, and the US is set to do so too Diversification

becom-in the US has hitherto been required to take place through separately italized subsidiaries in the hope of erecting ‘firewalls’ between them Thesehave yet to be tested, but there is considerable doubt about their likely effec-tiveness in face of ‘too big to fail’ considerations There does, however, seem

cap-to be an emerging trend cap-towards converting integrated universal banks incap-toholding companies with specialist retail (including telephone and/or inter-net), corporate and investment, asset management and (see below) insur-ance subsidiaries

The banks have sought to diversify their retail financial activities, oftenhoping to cross-sell products (for example, house insurance on the back ofhome loans) or simply to exploit the information contained in enlargeddatabases for marketing and product development purposes They havethus diversified their loan portfolios, often offering home loans which weretraditionally the preserve of specialist savings banks in many countries(savings and loans companies in the US, and building societies in the UK,for example) In addition, they have engaged in offering insurance andpension products, leading to the development of what has been called ‘ban-cassurance’ companies Many insurance companies are also in the process

of entering banking; often through the internet or telephone-based vices

ser-The development of global bancassurance firms providing retailbanking, insurance, and asset management (pensions and mutual fundsand so on), as well as investment banking services worldwide is thus on theverge of a reality The large financial conglomerates will of course continue

to compete with narrower specialist and domestically based institutions,some of which will be ‘national champions’ formed by domestic mergers.Some big questions remain

The globalization process has been facilitated by regulatory and visory harmonization Initially this consisted of an attempt to create a ‘levelplaying field’ for international banks through the 1988 Basle Concordat onrisk-related capital adequacy requirements and subsequent recommenda-tions from the ‘Basle Committee’ The creation of the ‘single market’ in theEuropean Union (EU) required the adoption of the second EuropeanCommission (EC) Banking Directive 1989 This consolidated the ‘conti-nental European’ model of universal banking, which combines investmentand commercial banking, and permitted the development of bancassu-rance Throughout most of the 1990s, Japan and the US maintained(though progressively relaxed, especially in the US) banking laws that sep-arated investment and commercial banking and banking from insurance

super-In 1998 Japan introduced ‘Big Bang’ legislation laying out a phased ation of these restrictions, and in 1999 liberalizing legislation was passed inthe US As predicted in Mullineux (1992, Ch 1), the drive to achieve inter-national competitive equality has led to the adoption of the more liberal,

relax-in terms of the scope of bankrelax-ing activity, ‘contrelax-inental’ European regime.This has in turn increased the range and intensity of competition amongthe increasingly globalized large banks In such a context, does the present,largely nationally based regulatory system provide for adequate regulationsupervision of the emerging global bancassurance companies and increas-ingly interlinked national capital market and the internet-based financialmarkets and transactions?