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– This paper examines the effect that foreign bank entry into China had on transaction fees and service fees charged by domestic Chinese banks.
This paper examines the effect that foreign bank entry into China had on transaction fees and service fees charged by domestic Chinese banks.
This paper is an empirical study using financial data for listed Chinese banks collected from the China Stock Market Financial Statement Database.
This paper finds that domestic banks cut transaction fees and service fees shortly before the entry into China of foreign banks, and domestic banks did not cut transaction fees and service fees after foreign banks entered into China.
This paper does not examine any non-price strategies employed by local Chinese banks in response to the entry of foreign banks.
This is the first study to examine transaction fees and service fees charged by domestic Chinese banks in response to the entry of foreign banks into China.
This article considers the action of the Canadian Government in lifting its “asset ceiling” on foreign banks, and examines the challenge foreign banks pose to the oligopolistic Canadian banking market. In particular, it focuses on the foreign banks' competitive advantage, their market targeting approaches and marketing strategies, and their acceptance in the marketplace.
US money and capital markets have changed dramatically over thepast 25 years. Despite the change and uncertainty, lending activities ofbranches and agencies continued to…
US money and capital markets have changed dramatically over the past 25 years. Despite the change and uncertainty, lending activities of branches and agencies continued to expand in US markets through the early 1990s. The focus of lending by agencies and branches of foreign banks has been altered to accommodate their overall growth. The largest relative gain in loan activities of foreign banks has been in real estate and business loans. In addition, loans to other financial institutions have declined in relative terms. The change in lending activities is consistent with what has been termed a commercial‐industrial strategy, one of several unique marketing strategies that have been employed by major US banks.
Until the Campbell Report in 1981 the Australian government had a stated policy of not permitting foreign banks authority to carry out banking business in Australia or to…
Until the Campbell Report in 1981 the Australian government had a stated policy of not permitting foreign banks authority to carry out banking business in Australia or to acquire interests in Australian banks. Following the report Australia now represents one of the most deregulated financial environments. In February 1985, 16 foreign banks were invited to establish full service banking operations. Considerable potential exists for these entrants but the banks will need to identify their competitive advantages quickly in relation to both indigenous and other foreign banks. All banks will try to expand market share by capitalising on their strengths and servicing recognisable market niches.
China's accession to World Trade Organization (WTO) opened its financial markets to foreign banks in December 2006. In addition to foreign banks’ expertise and experience…
China's accession to World Trade Organization (WTO) opened its financial markets to foreign banks in December 2006. In addition to foreign banks’ expertise and experience in modern banking activities, they also appear to have the interest, competitiveness, and regulatory advantages of competing with Chinese banks in the traditional Renminbi (RMB) business. Such competition will lead to a loss of RMB deposits and loans from local banks. Given that Chinese banks are currently ridden with large non-performing loans and low capital adequacy, the foreign bank entry will exert further pressure on the banks’ profitability and solvency. Without larger regular bailouts from the central government and fundamental changes on the roles of Chinese banks, China may experience a banking crisis in the post-WTO era. We propose two types of policy changes that may improve banks’ competitiveness and reduce the likelihood of a banking crisis.
This paper aims to examine the relevance of cross-border activity in the European banking sector, evaluating the role of differences in regulation to explain the level of…
This paper aims to examine the relevance of cross-border activity in the European banking sector, evaluating the role of differences in regulation to explain the level of interest in entering foreign markets.
The sample considers all banks in the European Union (EU 28) existing at year-end 2017, and information about the ultimate owners’ nationality to classify local and foreign banks is collected. The analysis provides a mapping of regulatory restrictions for foreign banks and evaluates how they impact the role of foreign players in the deposit and lending markets.
Results show that the lower are the capital adequacy requirements, the higher are the amounts of loans and deposits offered by non-European Economic Area banks and, additionally, the higher the probability of having a foreign bank operating in the country.
This paper provides new evidence on regulatory arbitrage opportunities in the EU and outlines differences among EU countries not previously studied.
Purpose – Investigate the causes and consequences of foreign financial institutions' divestments in China's banking sector which is an example of cross-border transactions…
Purpose – Investigate the causes and consequences of foreign financial institutions' divestments in China's banking sector which is an example of cross-border transactions by institutional investors.
Methodology – Use a sample of 26 foreign financial institutions' strategic investments in Chinese banks. Ten of those investments are divested after the global financial crisis. We investigate determinants of the divestment, business cooperation after the divestment, and Chinese banks' stock price reactions to the divestment announcement.
Findings – The poor performance of foreign financial institutions, which is attributable to the global financial crisis, and the institutions' regulated low equity ownership are important causes of divestment (or whole divestment). In contrast, Chinese banks' poor performance does not cause foreign divestments. Foreign financial institutions that fully divest their equity stakes usually terminate their cooperative business, which was required by the strategic investment agreement. The Bank of China and the China Construction Bank, which experienced large H-share divestments, experienced large economic declines in A-share values.
Social implications – Foreign financial institutions' strategic investments created substantial shareholder value before the divestment. Banking sector developments that rely on foreign investments are vulnerable to economic downturns in developed countries.
Originality/value of paper – To the best of our knowledge, this is the first trial to analyze the impact of divestments on divested bank performance.
This chapter examines whether the geographic distance between subsidiaries of multinational banks and their headquarters is an important factor in determining the…
This chapter examines whether the geographic distance between subsidiaries of multinational banks and their headquarters is an important factor in determining the performance of the subsidiaries. Using various performance indicators of 340 subsidiaries in 54 emerging and developing economies from 69 global banks during the years 1994–2008, we find evidence that first, the distance constraint adversely affects loan growth, profitability, and performance of foreign bank subsidiaries, and second, the unfavorable information asymmetry faced by foreign banks, due to the distance constraint, in financing foreign clients cannot be fully overcome by establishing their presence abroad such as setting up their foreign subsidiaries. We further examine if the effect of distance is symmetric across different banks and countries and find the following various economic, financial, and institutional factors to affect the strength of distance constraints in the multinational banking activities: the entry mode of foreign banks, the history of presence in local markets, the existence of credit information institutions, the cultural similarity between the home and host markets, financial depth, financial crisis periods, the stock market development, the banking market structure in host markets, and the hierarchy of the subsidiary in the multinational banking conglomerate.
In this chapter we study the intra-group transactions between the parent bank and its foreign subsidiaries in European Union (EU) countries during the crisis. We use…
In this chapter we study the intra-group transactions between the parent bank and its foreign subsidiaries in European Union (EU) countries during the crisis. We use hand-collected data from annual statements on related party transaction and find that they may create a serious problem for the stability of the foreign banks’ subsidiaries. Moreover, as some of those subsidiary banks were large by assets in some of the member states the related party transactions with the parent bank created a serious threat to the host countries’ financial system stability. We attribute this transaction to the weak governance in foreign subsidiaries. We suggest improvements in governance as well as greater disclosure of related party transactions in bank holding companies in Europe.
This chapter investigates a shock transmission path between a home country (a country where globalized banks’ headquarters are located) and a host country (Indonesia as…
This chapter investigates a shock transmission path between a home country (a country where globalized banks’ headquarters are located) and a host country (Indonesia as the emerging market) through the lending channel of global banks’ local branches (i.e., the internal transfer channel). Using novel data of monthly individual foreign bank’s balance sheet in Indonesia, the author finds the evidence that shocks to a parent bank and a home economy are transmitted to a host economy through the foreign banks’ internal capital market. With the Indonesia banks’ capital injections and their difficulty in financing dollar funds without risk premiums since the 1998s crisis, the foreign banks’ dollar lending in Indonesia is a good showcase of internal capital markets. A change in a home stock market index and industrial production appears to have a negative effect on growth rates in foreign currency loans of foreign banks in the host market. On the other hand, high growth rates in the parent bank’s stock price in the home market lead to an increase in foreign banks’ US dollar lending in the host country. This effect does not appear in local currency lending because limited hedging instruments against foreign exchange risk results in immobility of bank capital in the local currency.