Current State of Cross-Border Banking - Vrije Universiteit Amsterdam

Graph 1 indicates that the European countries have a more international orientation than any of the
countries from the Americas or Asia-Pacific. The large banks head-quartered in Sweden and
Switzerland even conduct most of their business abroad, but hardly become more or less international
over these six years. Italy and Spain on the other hand, are less international but show a substantial
in- and decrease, 10% and 9% respectively, in their degree of cross-border banking. All European
countries except France show a shift in their level of internationalization. This is not the case in the
Americas, where the US remain domestic over the period observed. The internationalization of the
Asian-Pacific countries differs quite a lot. China and South-Korea are almost completely domestic,
while Japan and especially Australia conduct some business abroad. Japan, however, shows a large
cross-border divestment over 2000-2005.
In the next section, we discuss the results in more depth and contrast the degree of cross-border
banking across the three economic regions.
International banks
Table 4 reports the international banks in the top 60 banks. Using our classification for the different
types of banks, we find that all banks in the Americas and Asia-Pacific are domestic. This reflects the
overall domestic orientation of the banks in the two regions. In Europe the number of domestic banks
decreased from 18 in 2000 to 15 in 2006. So, half of the banks can currently be classified as
international. The number of regional banks (i.e. “European” banks) increased from 7 to 11, even at
the expense of the number of global banks coming down from 5 to 3. Using the Lehmann test, the
upward trend of “European” banks and the downward trend of global banks are significant at the 1%
level (p = 0.0028 and p = 0.0097).
Insert table 4. Categories of international banks
Sensitivity analysis
Although the criteria for classifying international banking groups are intuitive, they are somewhat
arbitrary as well. We therefore also conducted a sensitivity analysis. To see whether more banks can
be classified as international, the first criterion is lowered by 10 per cent. An “international” bank is
then defined as a bank that conducts more than 45 per cent of its business abroad ( h ≤ 0.
55 ). A
regional bank remains an international bank that conducts 25% or more of its business in the rest of
the region ( r ≥ 0.
25)
and a global bank remains an international banks that conducts less than 25%
of its business in the region ( r < 0.
25).
Insert table 5. Sensitivity analysis
Table 5 shows the result of this sensitivity analysis. It reproduces the number of banks that would be
regarded as international under the relaxation of the criterion and pinpoints the banks that would have
been added. In the Americas, Citigroup is added as a global bank from 2004. Foreign business is 46%
and 47% in 2004 and 2005. Citigroup is the only American bank with truly international aspirations.
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