Problem

Discrimination against transnational banks

Other Names:
Protection of national banking from international banking
Restrictions of home countries on transnational banking activities
Prejudicial treatment of multinational lending institutions
Nature:

Banking regulations and other banking policies in certain countries reflect the industry protection approach. The objective of these policies is twofold: to minimize the access of transnational banks to local savings; and to promote national financial institutions. Access to local savings by transnational banks is curbed by imposing restrictions on the number, location and services of their branch offices. A variety of supplementary policies are designed to promote national institutions. The restrictions on transnational banks range from outright prohibition of any further branches or only the rarest of exceptions, to outright prohibition, which restricts foreign branches to one per transnational bank and limits their location to the nation's capital. Home country governments can also affect the context in which transnational banks operate in numerous indirect ways: examples of this are their management of aggregate real demand and their foreign exchange controls.

Background:

Since 1974, banking authorities in the home countries of transnational banks have voiced increasing concern about the growth of bank assets in developing countries. Granted that there is some basis for this concern, home countries could facilitate flows to developing countries by widening the pool of potential lenders instead of restricting it. Home governments could also help to increase the information about developing countries available to small banks, thus encouraging the move away from the dominance of the largest transnational banks. If home banking authorities doubt the capacity of the smaller banks to evaluate risk, they might consider permitting them to rely on co-financing schemes with multilateral development banks such as the World Bank or the regional development banks. This means that co-financing may require renewed support as a major method of reaching the second tier of banks with international operations, many of which are smaller transnational banks.

Related UN Sustainable Development Goals:
GOAL 8: Decent Work and Economic GrowthGOAL 17: Partnerships to achieve the Goal
Problem Type:
E: Emanations of other problems
Date of last update
23.10.2019 – 16:47 CEST