Abstract
Notes recent dramatic growth in international banking, outlines the US historical and legal background to it and reviews previous research trying to explain why banks establish offices outside their home country. Develops a mathematical model to investigate the factors determining the extent of foreign bank penetration in the US financial market and applies it to 1984‐95 data for Canada, France, Germany, Japan and the UK. Finds that expansion abroad is positively linked to the size of the home country’s banking industry and capital market; the need to respond to domestic credit market conditions; and the levels of trade and exchange rates between countries. Discusses the differences between the individual countries studied and consistency with other research; and considers the implications for US banks.
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