Advantages And Disadvantages Of International Expansion

1019 Words5 Pages
The advantages and disadvantages of international expansion the banking industry encounters.
Lately, the international financial integration has increased. Over the years, the world economy has witnessed an increase in the number of individuals and businesses using international banking services. In today’s competitive global economy banks have the option to solely service their home market, to export services to foreign markets, or to establish a presence in that market. Essentially, banks have two options of expanding their operations in foreign markets. They can either service foreign clients through their domestic offices or they can establish a presence in the foreign markets. In general, the reasons for bank internationalization in
…show more content…
It isn’t uncommon for international governments to seize control of a business if they determine it is their best interest to do so. However, there is an opposite example: In June 2010 Kyrgyz authorities nationalised two commercial banks Asia Universal Bank (AUB) and Manas bank specializing on loans. AUB lost $480mln. EBRD financed the representative of the Global witness (UK) who investigated illegal financial transactions including the withdrawal of funds to offshore companies and money laundering. A large-scale investigation has revealed that billions later appeared in the accounts of offshore companies outside Kyrgyzstan, including UK, were transferred through AUB. Approximately 10% of the state’s assets left the bank through international wire transfers. The interim government was forced to nationalize AUB and divide its assets into two separate banks.
Risk diversification. Bank by international expansion are able to generate more profits. A good examples of expansion over the globe are Santander and BBVA. They are currently operating in developed and emerging markets. Santander in Brazil, Chile, Britain, Poland and the US while BBVA opened its branches in Turkey, US, Mexico and other Latin American Countries. Those 2 banks gather capital in Europe with the low interest rate and lend it in emerging markets, where interest rates are much higher. At present interest rates in Brazil
Open Document