International Banking: A Survey

Abstract

TWO DISTINCT SETS of issues are involved in the analysis of international banking; one set, the industrial organization issues, centers on the patterns of expansion of foreign branches and subsidiaries of banks headquartered in the United States, Great Britain, Japan, and a few other industrial countries and on the nature of the advantage that these branches and subsidiaries have in relation to their host-country competitors. The second set, the international finance issues, involves the role of banks in cross-border and cross-currency financial flows, both from their head offices and from their foreign branches and subsidiaries. Despite the attention to international banking, there are few uniquely international institutions; rather international banks are a subset of domestic banks with significant numbers of foreign branches and subsidiaries. Moreover, there are few uniquely international banking activities; although foreign exchange trading may seem to be one, in many countries most or all foreign exchange trading involves domestic banks with few if any foreign branches. The growth of foreign branches and subsidiaries of major banks occurred in two waves. The first occurred in the decades before World War I; when the war started,