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INTERNATIONAL BANKING INDUSTRY.
Term Paper ID:28886
Essay Subject:
Need to compete globally. Market factors. Mergers & consolidations. Internet banking. Credit & debit cards. Industry problems.... More...
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Paper Abstract:
Need to compete globally. Market factors. Mergers & consolidations. Internet banking. Credit & debit cards. Industry problems.
Paper Introduction:
The International Banking Industry
Introduction and Statement of Purpose
As the world’s banks enter the new millennium, they face a confusing paradox. On the one hand, they need to be bigger, more diversified, and offer more comprehensive services in order to compete globally. On the other hand, in a rapidly changing market, on the most agile and nimble will survive - let alone expand and increase profitability (Keeler, 2000). Banking has moved from a bordered, domestic set of activities to a truly international orientation. This is being driven by market factors encouraging mergers and consolidations, along with other forms of affiliation that are reshaping this entire sector (Keeler, 2000).
McMillan (1999) stated that the banking world enters the new millennium a
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Deregulation is another major factor driving internationalization andthe expansion of ranks into new markets. The pairing of Hong Kong Shanghai Banking Corporation with Republic National Bank of New York . It is the goal of this research report to examine theinternational banking industry to determine of the foregoing concepts andconcernsand their likely impact upon the industry. Customers are creating demand 2. Visa: The card association to beat.Credit Card Management, 13 (2), 4 -47. This is because foreign banks with an internationalscope of activities are perceived as providing effective corporategovernance and consequently raising financial discipline in the economy atlarge. New strategic partnerships between largeinternational banks with small and mid-sized companies.American Society for Information Science Bulletin, 25 (5), 11 - 14. Farkas-Conn, I. Complaints about depersonalization of services due to bothaggregation and the increased reliance on IT are commonplace and aredirected equally toward both types of banks. Journal of Common MarketStudies, 38 )3), 4 9 - 425. The number of banks in this category is also falling each year as more andmore of the region's biggest banks are taken over by foreign entities andabsorbed into the parent groups' accounts. The merger of Deutsche Bank and America's Bankers Trust and plans by Deutsche Bank to merge its retail operations with rival Dresdner Bank . (2 ). Unofirst launch targets Internet customers. It also hasCitibank branches in more than 1 countries. Nevertheless, Gruzin and Davidow (2 ) maintain thatglobalization and banking and the entire financial services industry ishere to stay because: 1. However, thenumber of such banks fell following the 1997-1998 Russian financial crisis. Trade banking alliances. Changing financial industrystructure and regulation. Visaremains the card of choice globally, and constitutes the world's largestpayment system. Credit Suisse First Boston was also a major winner in 1999. In the UnitedStates, the passage of the Financial Services Modernization (Gramm-Leach-Bliley) Act of 1999 allowed the operation of commercial banking, investmentbanking, and insurance underwriting in the same holding company. Dermine (2 ) reported that these mergers havecreated banking concerns which have no borders or barriers to expansion;this has been facilitated by the consolidation of the European Union andthe release of the euro, as well as the creation of a single "open market"for trade that encompasses most of Western Europe. (1999). Keeler, D. Farkas-Conn (1999) also commented on the competition of theseinternational banks with other sectors and the features that given rise totheir competitive advantages. CEE bank erosion continues. They are offering institutional and consumer markets access tothese expanded and technology-rich services, and in the process are fastreaching the level of influence exerted by other "multinationals." Thefuture of this banking and financial service sector is very bright indeed,and likely to improve still more in coming years. In theaforementioned case of Indonesia, attempts to sell off banks that wereconsidered "disposable" have been abysmal. Another problem that the international banks and their closecompetitors face is that strategic alliances and partnerships with aregional or national bank can be financially devastating. Visa-branded credit programs grew in 1999 and early 2 ,though not as fast as did debit cards. They are best suited tocompete in the international markets that have taken on enhancedsignificance in recent years, and less dependent for their incomes on highinterest margins from loans of dubious quality. Perhaps the more significant impact of the Internet and related ITson international banking is that these technologies have tended to furtherminimize the effects of distance, space and time. Severalkey alliances include: . Consequently, Brewer and Evanoff (2 ) expect consolidation in financialservices to continue. At the same time, thesemergers have opened up debate as to the question of regulation andsupervision - tasks formerly managed by each nation-state and its owncentral bank. Wilson(2 ) described two such entities, Compubank and Netbank. Nadler, P.S. GlobalFinance, 13 (1 ), 2 -22. For international banks, ittherefore becomes extremely important to allow partners to take the "leadrole" in reaching out to local customers. Fact and fiction in Internet banking. Clark, P. Going global in the financial services sector is,consequently, not a seamless process nor one that is apparently easy tomaster. Bank behemoths to rule in new millennium. Both are known for having formed important strategic alliancesthat have placed them in advantageous positions in new markets where theparent firm, on its own, may not have penetrated easily. Connection via the Internet is, even in themost remote parts of the globe, more and more commonplace. The deal was delayed whenthe bank was embroiled in a huge scandal, and then called off whenprotesters at the bank refused to allow Standard Chartered's administratorsinto the building (Finance and economics..., 2 ). However, as Nadler (2 ) notes, Internet banking now constitutesabout three to seven percent of bank deposits. Further, financial crises of this sort tend to force nationalgovernments to take a more active role in regulating banking and financialinstitutions in their troubled economies (Finance and economics..., 2 ).In the case of Malaysia, for example, rather than seeking foreign bankingand investor partnerships to bail out the economy, the government isscrutinizing any pending bank aggregation or consolidation deals. Bowen (2 ) notes that competition internationally with respect tothese two types of cards is relatively limited. Banking in the 21st century. The impetus behind mergers and consolidations is the perceived needto share core competencies, mitigate risk and improve operatingefficiencies (Carder, 1999). banks have entered into such partneringarrangements for Asian processing alone. They are as likely, thanks to deregulation, to provide theirclients with financial investment counseling and options as well asinsurance plans and development assistance. They offerstandard banking services in addition to credit and debit cards andbrokerage accounts. Global Finance, 13 (1 ), 22 - 24. On the one hand, they need to be bigger, more diversified, andoffer more comprehensive services in order to compete globally. This entity will be known as first-e group or the unofirst group. Finance and economics: Diminishing returns. Such alliances are becoming more and morecommon. At the same time, Keeler (2 ) is quick to notethat efficiency gains can be outweighed by culture clashes and strictemployment laws in continental Europe may mean that the scope forinternationalization is limited. Jones (2 ) also argues that this is facilitating the expansion ofinternational banking. Mergers between traditionally separatesectors, such as banks and insurance companies, are also reshaping thebasic functions of such institutions. Global Finance, 14(1), 41 - 43. (2 ). Brewer, E., and Evanoff, D.D. In1999, HSBC launched personal banking branches and formed strategicpartnerships in Bangladesh, South Korea, Kazakhstab, Sri Lanka, and Taiwan. What has been created in the banking environment has been describedby Brewer and Evanoff (2 ) is a "constant whitewater," with deregulationand technological innovations providing important strategic opportunities.New financial delivery systems fostered by the Internet and innovations inthe electronic commerce arena are also fostering globalization. The Best Global Services Bank is Citibank, which was recognizedin1999 for its aggressive implementation of new technology and itsleadership in global cash management and trade products and services(Haddock, et al, 1999). The Internetoffers both challenges and opportunities, and new players in thiselectronic financial arena are moving to realize advantages over larger andmore traditional international bans. This inturn made possible the affiliations of American-owned or held banks withforeign banks already involved in one or more of these operational sectors. Deregulation is removing constraints 3. Brewer and Evanoff (2 ) pointout that beginning in the 198 s, market, legal, and regulatory developmentsin the United States and elsewhere allowed commercial banking organizationslimited entry to products and services that were previously offeredexclusively by other segments of the financial industry. Jones, C. HSBC acquired a 4 percent share in the Saudi Britishbank to consolidate its present in the Saudi market. (1999). Clark (2 ) reported that thisinternational banker has placed an enormous investment in its Internet andIT applications and is expecting to be able to reap the benefits. Keeler (2 ) also points out that the entire industry is undergoinga number of critically important changes. Financial giant Deutsche Bank embraces Internet.B to B, 85 (6), 1, 37+. Ithas identified these forces as based on technology, economies of scope andscale, and the globalization of markets and trade that have reduced theboundaries and barriers imposed on commerce by national borders. (2 ). (2 ). It also began offering cost-effective direct securitiestrading on the Internet. Federal Reserve that suggests thatmergers erode shareholder value as often as it increases it. Many Asian banks nearly wentbelly-up and were forced to turn to their national governments in order tosecure the funds needed to remain in business. The best banks: Thebest global banks. Online stock trading - a service that many internationalbanks now offer clients - has grown much, much faster than Internet bankingper se (Nadler, 2 ). What these regionsneed, according to experts reporting for The Economist (Finance andeconomics...,2 ), are more mergers and foreign acquisitions; Asia andother regions need healthy banks to thrive, and the players most likely toprovide for health banks are the internationals. SinceDeutsche Bank began its strategic alliance with Alex.Brown, it has movedsome $2 billion through its trading site and expects to move up to $1 billion per year through this technology. What this entity will accomplish is the linkage, via IT, of traditionalbanking and other financial services (including brokerage and insurance)and clients who are willing to participate in a "bank-without-walls"effort. While many analysts believe that "bigger is better" and that bothbanks and their customers will benefit from these trends, others feel thatthis may not necessarily be the case. The literature indicates that the largest international banks aresucceeding because they are aggressively forming strategic alliances andpartnerships, merging and consolidating to acquire huge capital assets andreserves. (1999). The Economist (Finance and economics..., 2 ) described the impactof this financial crisis on domestic and international banks. The International Banking IndustryIntroduction and Statement of Purpose As the world's banks enter the new millennium, they face a confusingparadox. This is,nevertheless, one area in which smaller or local/domestic banks andinternational banks meet on an essentially level playing field. The Economist(Finance and economics..., 2 ) recently described the fallout from thedebacle of many East Asian banks in the wake of the financial crisis thattook place in that region not too long ago. Again, technology seems to be driving thiseffort and may, over the long run, make critical differences between thewinners and the losers in the new global banking environment. An agreement with a Washington-based start-up to sell mortgage-basked securities over the Web to institutional customers in the U.S. Thus, bankers involved in the international environment are beingchallenged to consider new strategies and to take advantage of newopportunities, while also coming to terms with new risks and concerns(Keeler, 2 ). The four banks identified in 1999 asglobal leaders were Chase Manhattan, CitiGroup, Credit Suisse First Boston,and Merrill Lynch. Credit and debit cards are consumer- asopposed to corporate-oriented. Issues to be addressed includean overview of the industry and its growth, competition, development ofstrategic alliances, the role of the Internet and credit and debit cards inshaping this new environment, and potential depersonalization of anindustrywhich has prided itself upon its customer service.Overview of the International Banking Industry The international banking industry is being driven almost entirely bya wave of mergers that began in Europe some 15 years ago and whichcontinues apace today. (2 ). A massive takeover battle in France between Societe Generale, Paribas, and Banque Nationale de Paris (Haddock, et al, 1999).What these actual and prospective unions among some of the largest banksserving the global community signals is that bigger is better and bankingexperts have come to the conclusion that their interests are best served byeliminating competition through encapsulation of their rivals. Other factors that are facilitating the international-ization of thebanking industry were identified by Jones (2 ). A recent article in TheBanker (Unofirst launch..., 2 ) described the efforts undertaken by TerraNetworks and Banco Bilbao Vizcaya Argentario to create joint venture thatwill constitute the first global online banking and financial servicesprovider. alone, nearly 4 , smallbusinesses now bank online, with an additional 4 , expected to join theparty. Deregulation has created theopportunity for banks to incorporate a wide range and variety of formerlyprohibited financial services into their service portfolios. The Banker,15 (893), 158 - 159. There arefew, if any, significant differences between the performance of the twobank types on this critical issue. At this point, however, Wilson (2 ) considers theInternet to be more of a convenience or alternative distribution channelfor banks than a real threat to more traditional distribution channels suchas branches and home offices. The big internationals are competing inboth arenas, with the biggest staking out a strong position in the morelucrative world of corporate services.Problems in the International Banking Industry Like domestic banks, international banks can and often do encounteroperational and strategic problems as they attempt to increase their sphereof influence. For thefirst time ever, it is possible not only to identify but also to rank banksat the broadest level imaginable. (2 ). These banks as well as a largenumber of European financial institutions, have strong relationships withmajor importers in their respective markets. The idea is to strengthen them beforethey face foreign competition under commitments made to liberalizefinancial services, and to prevent them from becoming the prey ofinternational banks looking for new second-class local partners. International banks are also finding in some instances that there isvery real opposition to their presence in a country or a culture. The planned merger of Industrial Bank of Japan and two arch-rivals, Dai-Ichi Kangyo Bank and Fuji Bank . Product development focused on the implementation of banking services andnew credit cards. About 3 banksin these regions of Europe were moving dramatically ahead and acquiringsubstantial capital assets and expanded customer bases. In March 1999,it had acquired Spain's Gestion Integral, a family business specializing inprivate banking. When "going global" is considered by banking institutions, itis this kind of activity that immediately comes to mind as a majorrationale for such expansion. International and other megabanks toutthe cost-savings benefits of such "one-stop shopping" as being realized notonly internally, but by consumers as well. In the Asia Pacific region alone, Citibank works withlocal banks to staff more than 1, Citibank clearing zones. (2 ). In essence, this one example illustrates howstrategic alliances can transform a single bank or institution into a placewhere one-stop shopping for financial services can take place (Haddock, etal 1999). Using the Internet to service business customers.Community Banker, 8 (8), 16 - 19+. It offers its customers a full complement ofservices including finance and treasury services, management informationand controlling, asset and liability management, global treasury,securities, credit risk management, investment analysis, portfoliomanagement and consulting, and virtual banking. Closer oversight (governmental and otherwise) has become a fact ofbanking life in Asia since the crisis, but many stakeholders still havedoubts about strategic alliances formed with these regionals. What the Internet may have the potential todo in the long run is allow smaller banks to compete more effectively withthe international megabanks. Internationally, the e-commerce revolution is also becoming moreand more a factor in banking strategic development. This is being driven by market factorsencouraging mergers and consolidations, along with other forms ofaffiliation that are reshaping this entire sector (Keeler, 2 ). Most of these major international banks offermultiple types of financial services in addition to standardized bankingactivities such as checking and savings accounts, personal and corporateloans, etc. TheSecured Lender, 56 (3), 44 - 48. It isable to field one of the largest sale and trading organizations in theworld, with market leadership in foreign exchange and derivatives. It isthese customers that are responsible for the development of a new bankingmodel for the world - the global or international bank. The Economist,355 (8168), 73 - 74. The Banker, 15 (89 ), 28 - 29. Carder, C. Culture may "matter" most in terms of smaller businesses andconsumer clients. McMillan (1999) stated that the banking world enters the newmillennium after a decade abuzz with the words "consolidation,""integration," and "synergy." The result is an industry led by the so-called universal banks and the notion of the one-stop shop for allfinancial services. Debit cards are gaining inpopularity as online banking takes off in Europe and the Asia Pacific andLatin American regions; the debit card is well-established in the UnitedStates and seems likely to continue to attract users. This is because until relatively recently, onlinetransactions offer clients and providers alike few innovations and cost-savings over and above what has already been achieved by direct-debittransactions for payment and the use of the telephone as a communicationstool. It also pushedthe firm further into Japan. Haddock, et al (1999) claim that these banks are nolonger content to dominate the industry in their own countries and arebeing joined by an unprecedented number of financial institutions steppingoutside of their country's borders to attain true global reach. Issues of privacyand confidentiality abound, especially in the context of online financialservices and synergistic financial service providers. The bankhas become the world's second largest bank in terms of total assets, and isnow undertaking a stunning array of Internet-based business-to-businessInternet projects including: . More and more governments in the post-Communistregion have come to appreciate the overriding advantages of suitable,experienced foreign banks becoming strategic investors in the core of thelocal banking systems. Carder (1999) notes that this is often the case as well when a bankassociated with one culture - such as Western Europe - acquires a strategicpartnership in the Asia Pacific region. A corporate Internet banking portal; . A recent study by Anderson Consulting found that only 14 of theworld's 31 largest global financial services organizations achievedsuperior return to shareholders over a ten-year study period (Gruzin andDavidow, 2 ). Keeler (2 ) reported that there issome evidence generated by the U.S. Others had been too heavilyvested in the speculative real estate bubbles of the late 199 s, and wereforced to do serious retrenching. Private customers as well as corporate customershave ready access to a large volume of information which makes it possiblefor them to switch banks easily in their search for lower prices. That means, ultimately,fewer banks, serving a wider range of customers, using the best technologyand the very best talent that is available.Summary and Conclusions This report has moved from an overview of the international bankingindustry to an assessment of the various factors or forces that haveaccounted for its dramatic and even spectacular growth in recent years. Carder (1999) notes that whenthese alliances are created, institutions seek partners with a strongcorrespondent banking relationship focus. Banks likely to be more influential as international playersin the near future include ING Barings, ABN-AMRO, and Morgan Stanley DeanWitter. Both regions are farmore likely to benefit from the active participation of internationals thanto achieve desirable economic goals in their absence. Dermine, J. They are able to be supportiveof small- and medium-sized business enterprises (SME) and are creating newstrategic partnerships with these commercial entities. The partnering program may oftenbe initiated to meet the needs and the timetable of specific clients.Banks that have made this transition are aware of the end-to-end challengesthat are raised in the process. Deutsche Bank has moved ahead of other American-based internationalbanks in using Internet technology in Europe, where the Internet economy isjust taking off (Clark, 2 ). It isforcing its banks, insurers and securities houses to merge into a handfulof big (but domestic) institutions. Euromoney, March, 11 -12. B. Other universal banks include Chase Manhattan and UBS,both of which also have a strong presence in more than one locale or regionof the world. Banks whichpossess several of these elements are more likely than others, saysMcMillan (1999), to succeed in the new internal environment that is comingto characterize the financial services industry. Bank mergers in Europe. Global asset management through reducing competition and creatingstrategic alliances appears to be the forte of Merrill Lynch (Haddock, etal, 1999). In July 1999, itacquired the Spanish private banking business of Abn-Amro. Merrill Lynch purchased British fund manager Mercury AssetManagement for $5.2 billion in early 1999. Citibank has created strategic alliancesthroughout the Asia Pacific area and has also been awarded a series ofinstitutional custody mandates including Fidelity Investments andOppenheimer Funds. Netearnings in 1999 were up by 21 percent over the previous year - thusdemonstrating the benefits to be gained from becoming a major internationalplayer. Larger banks, whether theyhave an extensive international presence or not, are often criticized bytheir clients for being too impersonal and too distant. Wilson, C. Culture also matters, as was briefly indicated earlier in thisreport. When Eastern Europemoved away from communism and toward open, free market economic systems,national banks in Central and Eastern Europe began to appear in the BankersTop 1, list shortly this market transformation occurred. On theother hand, in a rapidly changing market, on the most agile and nimble willsurvive - let alone expand and increase profitability (Keeler, 2 ).Banking has moved from a bordered, domestic set of activities to a trulyinternational orientation. Fortunately, that kind of event has been relatively rare overall asinternational banks take control of smaller banks. It also providescomprehensive financial advice covering tax inheritance, trusts, pensionprovision, insurance and real estate, bancassurance products, and creditand retail products. Consumers are not sure that thisis always the case. Mergers andacquisitions as well as consolidations are creating "megabanks" that canaggregate capital and other resources to gain very real competitiveadvantages as well as economies of scale and scope. McMillan (1999) reported that when corporate investors were recentlyasked what specific characteristics are likely to make a banking concern amajor international player and power, respondents indicated that afunctional global network, size and corporate strategy, a strong Europeanas well as Asian and American presence, leadership, and internal managementalong with large capital resources were cited as essential. Brewer and Evanoff (2 ) have pointed out that while the banks thatare aggressively moving to take advantage of deregulation by signing uppartners in brokerage and insurance are thrilled with their new freedom,customers are not always as pleased. It is no longer possible for banks to rely on afaithful customer base. Haddock,et al (1999) say that this international bank was the best global privatebank with 3 , clients from Abu Dhabi to Vienna. It has achieved thispresence largely through branching and strategic alliances. In the case of ChaseManhattan, 1999's Best Global Wholesale Bank, the organization demonstratedcompetency in pulling together large syndicated loans, providing capital toits clients, and giving a much needed boost to market confidence. Efficiency gains are described by Keeler (2 ) as making theinternational banks more competitive when they come into conflict withlocal or national banks. Asia depends (as doescentral and eastern Europe) on bank-financed growth. A study conducted by Haddock, Brandman, andCoorey (1999) determined that the global bank is now a reality. Financial industryconsolidation, which has led to banks being able to offer clients servicesnot once the purview of banks, has thrived on the ability of a bank to"convert" its clients from banking service users to users of broker andinsurance services as well (Brewer & Evanoff, 2 ). Customers fear, with some degree of legitimacy, that there issuch as thing as "too big" and "too diverse." Banks that join inpartnerships with insurance companies, for example, are perceived as beingvulnerable to company failures that may negatively impact upon the banksintrinsic value; customers who might be negatively impacted by such asituation may prefer to obtains secondary or non-banking serviceselsewhere. This gave Merrill Lynch aEuropean presence and an edge over Fidelity Investments. These corecompetencies range from global networks to assets and capital resources.Availability and market presence are also considered to constitute a corecompetency which an international bank can offer as a real advantage to itscustomers. The marriage of Warburg Dillon Read with Union Bank of Switzerland . The banks that offer thiskind of service are called "brick-and-click" banks, promoting computerizedbill paying, funds transfer between accounts, stop payment services,balance inquiry, credit card and loan applications, and brokerage activity.Once again, as Nadler (2 ) indicates, it is the international banks thathave moved most aggressively to provide these desirable services to theirclients. Throughtheir global relationships and networks, they are re even capable oflinking manufacturers and service providers to clients - and thusfurthering the globalization effort itself.Internet Banking and the Role of Technology The Internet and its potentials have forever changed the financialservices industry. These,then, are the most important factors that are facilitating the growth ofthe international banking industry.Competition and Development of International Strategic Alliances McMillan (1999) contends that universal banks are expected toflourish in the new millennium because they will possess superior corecompetencies that national banks will not be able to replicate. A small number of banks - such as Citigroup DeutscheBank and HSBC - are regarded by corporate investors as global leaders(McMillan, 1999). (2 ). Both arerelatively small players in the international banking industry, but theyare aggressively reaching out to customers across the globe. A deregulated financial services sector opens up thespecter of institutional failure due to excessive growth and failedsupervision. Haddock, F., Brandman, J., and Coorey, M. What the strategy offers - and what is becoming increasinglyappealing to other international banks and some non-international banks aswell - is significant cost-savings over "bricks-and-mortar" facilitymaintenance. This is very, very big money; itis highly likely that other international bankers will jump on the Internettrading and service bandwagon (Clark, 2 ).Credit and Debit Cards International banks, like smaller banks, almost universally offertheir clients credit and debit cards as a pro forma service (Bowen, 2 ).These cards have become about as ubiquitous as it is possible to be. They are employing advanced information technology to connecttheir far-flung operations, and entering deregulated business sectors suchas brokerage and insurance as soon as the ink is dry on national enablinglegislation. At the same time, however, manycorporate and more affluent private clients are searching for precisely thekind of services, images, and options that the international banks canoffer. The drive towards internationalization or globalization is a drivewhich seeks to position a bank as the financial institution of choice innew markets (Carter, 1999). (2 ). This includescustomers in the United Kingdom, continental Europe, the United States,Latin America, India, the Middle East, Asia and the Pacific region. The constant theme that emerges is that size doesmatter in this industry, with global presence or large capital resourcesbeing cited as the factors that tend to distinguish the best performingbanks from the rest. The country agreed to sell off2 percent of Bank Bali to Standard Chartered. There are even internationally oriented Internet-only banks. In December 1998, this bank's total assetsstood at $299.8 billion with stockholder equity of $1 .1 billion. McMillan, A. Emerging markets offer banks andinvestors a chance to realize quick returns on investments, but many ofthese markets are prone to great credit risks and lingering fallout fromthe 1997 Asian financial crisis. The can offer theSME a range of assistance options that a local or national bank may nothave access to; they can tailor-make a financial plan for SMEs that isoften far superior and more comprehensive than that which another lessinternational and more narrowly focused institution can achieve. Haddock, et al (1999) also identified the idea that global reach,often through making overseas acquisitions, is the clearest strategy forindependent survival. Deutsche Bank does not agree. Well over a dozen U.S. Theinternational banks and their institutional investors, fearing the worst,tapped into their cash reserves to provide assistance to failing Asianbanks. Currently, there are only two truly "global" consumer banks" Citibankand HSBC. and Europe (Clark, 2 ). (1999). The reporthas also examined the literature in some depth to provide for an overviewof what distinguishes an international bank and the international bankingindustry for other segments of this sector. Chicago Fed Letter, 157A, 1 - 4. In the U.S. Wilson (2 ) stated that one advantage of this strategy is that ithas the potential to secure for international banks the small businesscustomer who may lack access to the full range of vital financial servicesthat the big banks can offer. The message is clear: formstrategic partnerships with smaller or national banks, but make sure that amajor financial crisis is not in the wings. The Internet is breeding a new class of winners. Haddock, et al(1999), have suggested that in the case of HSBC, personal banking has beenbrought to a very impressive variety of customers worldwide. The Internethas changed some of the basic ways in which such institutions reach out toand service customers, as well as the ways in which their internalprocesses are structured and their activities performed. Some banks operating in the emergingmarkets are poorly regulated and monitored, increasing risk of affiliationwith these institutions. Their international partners were alsodamaged by the crisis, and this left stakeholders (institutional andothers) with a very bad taste in their mouths. References Bowen, C. If a small ormid-sized business cannot obtain the financial services it needs from alocal, domestic bank or a branch of the majors, it can dial up, log on, andclick a mouse to gain access. (2 ). Haddock, et al (1999) believe that by examining some of theattributes of the best international banks, it becomes possible tounderstand how such banks achieve competitive advantage and why they electto develop international strategic alliances.
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