Protectionism and international banking : Sectorial efficiency, competitive structure and National policy

This paper deals with barriers to trade in services. More specifically, the paper deals with competition and its absence in the provision of international intermediation services by banks. Section 2 of the paper examines the substitutability of international trade and FDI (foreign direct investment) in the services sector as a basis for international competition. It also considers the overlap between commercial policy measures and regulations governing the entry and operations of foreign affiliates. Section 3 describes the types of restrictions imposed on foreign banks and evaluates their effects. Existing practices in some countries are outlined in the fourth section. The countries are the U.S., the U.K., Switzerland, Australia, Brazil and Taiwan. Section 5 evaluates competitive conditions in offshore banking centers, and compares them with conditions in onshore markets. The last section evaluates the costs and the benefits of an ‘open’ (free-trade) banking system. Such a system will tend to improve world welfare as well as the welfare of those countries who have a comparative advantage in international banking. The results are not clear with regard to the countries who have a comparative disadvantage in banking.     

Taxation and international banking

The purpose of this paper is an examination of the relationship between taxation and the working of international banking arrangements. The main task is directed to the ways taxation determinations by national authorities affect the ways international banks go about their business. International coordination through the Organisation for Economic Co-operation and Development (OECD) is a major focus of the analysis. There is no general exposition of principles bearing upon international taxation. Rather, attention is directed to the determination of tax obligations in any one jurisdiction. Thus, there is a close scrutiny of the mechanics of taxation in the international setting bringing out the uncertainties and the imponderables in any application. Much attention is given to structural arrangement in international banking as well as capital arrangements in any one jurisdiction and how this applies to and affects the banking group as a whole. The result is to bring out the complexity of the agenda for tax applications on a common basis across internationally operating groups. Most jurisdictions recognise that they cannot await common agreements because new instruments and arrangements emerge at very frequent intervals and their tax implications have to be addressed. There has to be relief from uncertainty if markets are to develop effectively. Thus, there is in an importance sense of partnership between tax authorities and market participants in many countries. International deliberations have taken too long.     

National corruption and international banking

This paper identifies national corruption as a determinant of international banking. Using total international banking claims of 21 countries from worldwide borrowers, at the bilateral lender-borrower level, we document that when lender countries are less corrupt than borrower countries, international banking volume tends to be higher between countries with similar corruption levels. In contrast, when lender countries are more corrupt than borrower countries, corruption difference has no significant impact on international banking volume, because relatively more corrupt lenders perceive relatively less corrupt borrowers as generally creditworthy. The effect of corruption difference weakened during the 2007–2009 financial crisis, but subsequently regained its precrisis strength among the relatively less corrupt lenders while gaining new force among relatively more corrupt lenders.     

Recent trends in international banking

The paper defines ‘international banking’ more as a geographical expression than as a particular type of activity and points out that the internationalization of the world's major banking systems was in many cases an evolutionary phenomenon governed by market or institutional developments. It analyses both the development of international banking structures, stressing the process that brought banks to prefer international retail activity rather than wholesale, and the relationship between domestic and international banking. Finally, the paper deals with the not easy to resolve problem of the establishment of lender of last resort facilities in international banking.     

Money, banking, and monetary policy

An important function of banks is to issue liabilities, like demand deposits, that are relatively safe and liquid. We introduce a risk of theft and a safe-keeping role for banks into modern monetary theory. This provides a general equilibrium framework for analyzing banking in historical and contemporary contexts. The model can generate the concurrent circulation of cash and bank liabilities as media of exchange, or inside and outside money. It also yields novel policy implications. For example, negative nominal interest rates are feasible, and for some parameters optimal; for other parameters, strictly positive nominal rates are optimal.     

Disclosure policy choices under regulatory threat

This article shows that firms “voluntarily” increase their disclosures in response to the threat of more stringent disclosure regulations. These disclosures are mostly just sufficient to deter regulation. However, when investment risk is low, both managers and investors might strictly prefer the regulation deterring equilibrium. We further find that in many cases, regulation can only be deterred by asymmetric disclosure behavior of the firms. This suggests that coordination issues and free‐riding may be important reasons why self‐regulation may fail. The results also indicate the importance of considering political pressure and regulatory threats to explain observed symmetric and asymmetric voluntary disclosure behavior.     

The banking industry under uncertain monetary policy

The optimal loan decisions of banks are shown to be dependent on the banks' rational forecast of the future federal funds rate which in turn is related to the policy rule used by the Fed. Consequently, a change in the policy of the Fed will alter the reduced form model of the banking industry. This result brings into question the Fed's ability to predict and control the money stock under the procedure adopted by the Fed between October 1979 and September 1982.     

Disclosure regulation and public policy a sociohistorical reappraisal

This study questions contemporary precepts concerning the SEC's disclosure system as being both ahistorical and asocial. The authors suggest that disclosure was but one of several modes for resolving the contradiction between an individualistic, market-based public philosophy and increasing economic concentration and centralization. When understood in these terms, the securities acts are seen not as fundamental changes in public policy but as part of an ongoing attempt to maintain an ideological, social, and economic status quo.     

Financial innovation, multinational banking, and monetary policy

The subject of the paper is the causal chain from financial innovation to multinational banking and further on to the conduct of monetary policy. The second section identifies the salient features of the present phase of financial innovation. The third section analyzes the consequences for the structure of international banking. The remaining three sections discuss the probable implications for, respectively, (1) the alleged disturbances from international capital flows (which, it is argued, are usually overestimated), (2) the effectiveness of monetary policy (where the principal consequence seems to be the competitive dismantling of discriminatory regulation), and (3) the viability of intermediate targets (which is impaired).     

引领中国银行业软件开发走向国际——专访中国工商银行副行长张衢

记者：工商银行软件开发中心成立十年来，成功开发出了上千个项目版本，提升了企业核心竞争力，奠定了工商银行信息化建设领先于同业的基础。请您简要介绍和评价一下软件开发中心的成就。     

Disclosure and the cost of equity in international cross-listing

In this paper, we examine the relationship between disclosure level and the cost of equity capital for a sample of international firms cross-listing on the New York Stock Exchange. Increased disclosure has the potential to reduce information asymmetry, reduce the cost of financing and increase analyst following. Using an international asset pricing model, we find that listing firms experience a decrease in both disclosure risk and systematic risk while matching firms do not. Further, we find that the magnitude of the decrease is related to three types of disclosure: accounting standards; analyst following; and exchange/regulatory investor protection. Our results suggest that increased disclosure through accounting standards is beneficial to investors and that disclosure can be accomplished through information intermediaries, e.g., analyst following. For firms with the lowest levels of disclosure prior to cross-listing, all three types of disclosure appear to be valuable.

Operational efficiency in banking: An international comparison

In this paper, we estimate a global cost function for international banks to test for both input and output inefficiencies. Our results for 1988–1992 suggest that for banks in 15 countries, the prevalence of input X-inefficiencies far outweighs that of output inefficiencies (as measured by economies of scale and scope). Moreover, our results suggests that the distribution-free model overestimates the magnitude of X-inefficiencies relative to the stochastic cost frontier approach.Large banks in separated banking countries (that prohibit the functional integration of commercial and investment banking) had the largest measure of input inefficiency amounting to 27.5 percent of total costs as well as significant levels of diseconomies of scale. All other banks have X-inefficiency levels ranging in the area of fifteen percent of total costs with slight economies of scale for small banks.     

国际银行业并购特征与动因分析

诺贝尔经济学奖获得者乔治·斯蒂格勒在《通向垄断和寡占之路-兼并》一文中开篇就说,一个企业通过兼并其竞争对手而成为巨型企业是现代经济史上一个突出现象,没有一个美国大公司不是通过某种程度、某种方式的兼并而成长起来的。事实的确如此,翻开世界经济史,几乎所有的大企业都是通过合并重组而实现其发展壮大的,金融业尤其如此。金融业的并购重组在金融     

The problem of confidence in domestic and international banking systems

The paper touches several points of great importance to the functioning of the domestic and international systems such as bank disappearances, loans to LDCs, rescheduling and supervision. In particular, with reference to bank disappearances, it makes a distinction between those caused by problems of liquidity and those due to problems of solvency, suggesting that only in the first case would government intervention be advisable. With regard to supervision it stresses that the public bodies and the private banks have to share the responsibility for the maintenance of confidence in the system.     

Monetary policy and financial stability in a banking economy: Transmission mechanism and policy tradeoffs

The 2008 global financial crisis demonstrated that monetary policy and financial stability policy are more highly interrelated than previously thought. This paper analyzes the interactions between these policies using a non-linear overlapping-generations model with financial frictions in the form of banking financial intermediation. The paper embeds negative externalities due to contagion effects in physical investments which creates the need for financial stability policy. We show how the monetary policy transmission mechanism depends on financial stability policy tools as well as on regulatory and institutional constraints.We find policy tradeoffs in trying to accomplish both monetary and financial stability targets. The central bank must take these tradeoffs into account when selecting the tools in its policy toolbox. Another important finding is the interchangeability of price stability and financial stability policy tools.     

State owned banking: gaining policy support and investor interest

State owned banking has staged a major comeback. Finding a place among the top 25 banks in the world in terms of market cap and assets apart, state owned banks have emerged as hot stocks for domestic and international investors. In the aftermath of the global financial crisis, privatization of the financial sector, which has been the major policy thrust evident in numerous countries, took a backseat with governments taking over banking institutions and providing various forms of support ranging from capital injections to outright nationalization of the global banks adversely affected by the crisis. The current crisis also may encourage governments to keep their stakeholding in the public banks in view of the need to support the vital sectors of the economy and also pursue financial inclusion that emerged as a major policy priority. This article presents a brief perspective on the comeback of the state owned banking, and also its own transformation that led to its growing acceptance and endorsements from policymakers investors and customers.     

Economic stability under alternative banking systems: Theory and policy

In this paper we show in a thought experiment that in an economy where i) investors hold rational expectations, ii) output is generated by a linear homogeneous production function, and iii) real investment is allocated across sectors according to the CAPM, a fractional reserve banking system is not Pareto efficient and amplifies the business cycle. In developing these results we show that these three well known propositions in economics also imply a new view of the business cycle, one where the business cycle is described in terms of the dispersion of an ex-ante probability distribution. The policy implication of this analysis is that bank regulation should go further than the Volcker rule or the Vickers commission proposal by restricting bank investments to currency and deposit accounts on the central bank. Nonbank financial institutions should then carry out the financial intermediation function now carried out by banks. The paper proposes that post office banking perhaps augmented with blockchain technology sometime in the future is one way to implement the transition from fractional reserve banking to full reserve banking. While little academic work has been done on full reserve banking in the aftermath of the Great Crisis, it is interesting to note that it is part of banking reform proposals now (July 2016) before the parliament in Iceland and a special national referendum in Switzerland.     

Optimal liquidity management and bail-out policy in the banking industry

We characterize the profit-maximizing reserves of a commercial bank, and the generated probability of a liquidity crisis, as a function of the penalty imposed by the Central Bank, the probability of depositors' liquidity needs, and the return on outside investment opportunities. We demonstrate that banks do not fully internalize the social cost associated with the bail-out policy if the liquidity needs of individuals are correlated, and that competitive interbank markets will induce banks to raise their reserves under reasonable conditions. The marginal benefits from an interbank market decrease as the correlation between the liquidity shocks of banks increases.