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Global Integration of Banking Markets: At What Cost? (Simpson J. L.)

Bank Systems Interbank Markets Regulation

Abstract According to recent literature, country and regional banking systems are becoming more concentrated, particularly in developed economies. Banks are growing larger through takeovers and mergers. The drivers of greater bank size appear to be the needs to achieve economies of scale and scope, improvement of financial services synergies and economies of integration. The process continues in an environment where the World Trade Organisation (WTO), central banking authorities and governments are acknowledging the economic and political desirability of liberalising financial services. This paper takes the position that there may also be significant financial and economic costs attached to global banking financial integration. Regression, correlation, cointegration and causality analysis of unlagged and lagged daily bank price and price index first differences data indicates that developed countries and regional banking systems have achieved a high level of global integration. Integration implies interdependence, which in turn implies the existence of systemic risk. International banks can avoid the threat and the costs of systemic risk by adopting or re-focusing on a culture of portfolio diversification of investments and borrowings. Greater involvement by a global banking regulatory authority may be necessary in ensuing years to monitor undiversified systemic interdependence.
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Libref/ Simpson J. L. (2005) "Global Integration of Banking Markets: At What Cost?", University of Wollongong in Dubai Working Paper No. 37/2005, pp. 1 - 35
© Программирование — Александр Красильников, 2008
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