世界发展银行-Cross-Border-Banking-in-EMDEs---Trends,-Scale,-and-Policy-Implications_35页_1mb

Summary of "Cross-Border Banking in EMDEs: Trends, Scale, and Policy Implications"

Core Content

This working paper by Erik Feyen, Norbert Fiess, Ata Can Bertay, and Igor Zuccardi Huertas explores the trends, scale, and policy implications of cross-border banking activities in Emerging Markets and Developing Economies (EMDEs). It highlights the increasing importance of EMDE-based financial groups in global financial integration and the challenges they pose for policy makers and regulators.

Main Trends and Drivers

• Growth and Expansion: Cross-border banking in EMDEs has expanded significantly across most World Bank regions, with EMDE groups growing in size, geographical reach, range of activities, and complexity.

• Asset Scale: By end-2013, EMDE groups had $1 trillion in assets in EMDE host countries, which represented 41.6% of the total assets of all cross-border banks in those countries.

• Regional Activity: EMDE groups from 46 home countries were active in 75 host countries. Notable examples include:

  • Sub-Saharan Africa (SSA): Expansion of pan-African banking groups, especially from South Africa and Nigeria.
  • Europe and Central Asia (ECA): Some regional banks branched out, including from Russia, Slovenia, and Hungary.
  • East Asia and Pacific (EAP): Rising cross-border banking with significant roles for Malaysian and Singaporean banks.
  • Latin America and the Caribbean (LAC): Expansion of regional financial conglomerates, with Brazil and Colombia playing key roles.
  • Middle East and North Africa (MENA): Qatar National Bank has become one of the largest regionally active banks.
  • South Asia (SAR): EMDE groups from countries like South Africa, Russia, and Colombia have a strong presence in other EMDEs.

• Fintech Influence: Fintech is reshaping the landscape by enabling EMDE groups to offer new financial services, particularly in reaching underserved populations, but also poses regulatory challenges in managing innovation, competition, and financial stability.

Scale and Characteristics of EMDE Groups

• Subsidiary Network: By end-2013, EMDE groups had 319 overseas banking subsidiaries in EMDE hosts and 49 in Advanced Economies (AEs).

• Group Complexity: EMDE groups are increasingly complex, with:

  • Majority ownership of 30 foreign subsidiaries on average.
  • 17 of these subsidiaries located in EMDE host countries.
  • 13 subsidiaries in the real sector.
  • Some subsidiaries are majority-owned up to the 6th level of the ownership chain, indicating a complex morphology.

• Geographical Reach: The median EMDE home country has banking ties to four EMDE hosts, with SSA and SAR being the most and least interconnected, respectively. South Africa is the most connected home country, with ties to 15 EMDE hosts.

• Asset Growth:

  • In the median host country, assets from EMDE group overseas subsidiaries increased from 2.6% to 13% of total host bank assets between 2000 and 2013.
  • In the median home country, the proportion of overseas EMDE group assets increased from 0.4% to 2.1% of total home bank assets.

Policy Implications

1. Stronger Consolidated Supervision:

   • Regulators need to supervise EMDE groups at the group level, including holding companies and real sector arms.
   • Effective regulation of capital, liquidity, risk management, and governance is essential.

2. Regional Coordination and Harmonization:

   • Greater coordination and regulatory harmonization between home and host countries are needed to address regulatory arbitrage and build up cross-border risk management frameworks.

3. Improved Corporate Governance:

   • EMDE groups should implement robust group-wide governance and risk management systems to ensure transparency and stability.
   • These systems will provide reliable information for regulators and enhance supervision effectiveness.

4. Challenges for Policy Makers:

   • Institutional Capacity: Both home and host countries face challenges in regulatory capacity.
   • Political Factors: National protective measures and regulatory differences can create an unlevel playing field, deterring EMDE groups from expanding.

Conclusion

The paper emphasizes the dual role of cross-border banking in EMDEs: it can drive financial development and economic growth but also introduces risks of instability and contagion. It calls for stronger supervision, regional coordination, and improved governance to maximize benefits while managing risks. The findings are based on data from 46 EMDE home countries and 51 prominent EMDE groups, highlighting the need for policy responses tailored to the specific conditions of EMDEs.