The Committee on the Global Financial System (CGFS) today released Long-term issues in international banking, a report prepared by a CGFS Study Group chaired by Hans-Helmut Kotz, former Executive Board member of the Deutsche Bundesbank.
The report addresses structural issues in international banking from three angles: a historical perspective, what the drivers have been, and what might happen next.
* The development of international banking: the report documents its evolution over the last 30 years in terms of size, form and geographical coverage.
* The factors behind the development: the report provides a critical review of the literature on the various drivers of international banking. A noteworthy conclusion is that the fast growth of internationally active banks, which contributed to the vulnerability of their business model, is difficult to explain on efficiency grounds, at least at an aggregate level. This suggests that institutions’ incentives might have been distorted, which warrants further investigation.
* Potential future developments: in addressing this more speculative question, the report pays particular attention to the regulatory reform environment, the pattern of economic growth worldwide and the rapidly evolving interactions between markets and banks.
Long-term issues in international banking is the last in a series of three CGFS studies analysing current challenges for international banks. Mark Carney, CGFS chairman and Governor of the Bank of Canada, says the CGFS is confident these reports will make a valuable contribution to the current debate about policy responses to the financial crisis.
