After the global financial crisis: From international to multinational banking?

The financial crisis has led to a reconsideration of banks’ global business models. Using a dataset derived from the BIS banking statistics, this paper studies the geography of global banking. It distinguishes between “international” and “multinational” banks, their respective funding models and the associated degree of centralisation in their operations. As a result of post-crisis regulatory reform, the long-term trend toward local banking is likely to accelerate, especially if liquidity regulations are applied locally.

► The financial crisis has led to a reconsideration of banks’ global business models. ► Using a unique dataset derived from the BIS international banking statistics, this paper characterises banking systems by the geographical structure of their foreign operations. ► Already prior to the global financial crisis, we observe a gradual, long-term trend toward local banking, amid a persistent diversity in banks’ underlying funding models. ► Following the global financial crisis and in the wake of regulatory reform, the trend toward decentralised multinational banking is likely to accelerate, particularly if liquidity requirements will be applied by host regulators on a legal entity basis.