Foreign and Domestic Banks: A Comparison for Customer Satisfaction and Perception

Throughout history the Canadian and American banking systems have always taken separate approaches to the financial sector. There are many factors that influence the differences between the banking systems, some of which including their banking regulations, customer base and the chosen style of banking. All the factors presented have influenced the results of the banking sectors in both countries. Both systems have pros and cons, however the argument presented will reflect and support the benefits and success of the Canadian banking system and its ability to support the Canadian economy throughout the country’s history.

There are various categories of banking; these include retail banking, directly dealing with small businesses and persons. Commercial and Corporate banking which offers services to medium and large businesses (Koch & MacDonald 2010). Private banking, deals with individuals, offering them one on one service. The last category is investment banking. These help clients to raise capital and often invest in financial markets. Most global banking institutions provide all these services combined. With all these institutions in existence within the same localities and offering similar services, there is a need to regulate the industry so as to protect the consumer and provide fair working environment for all banks (Du & Girma, 2011).

Now, many of these banking groups are owned by foreign investors, despite attempted safeguards. This ownership has provided investors leverage and influence over the actions of the government because the government owes an exorbitant amount to these banks (Daniel Lederman). The same argument can be made about the United States’ government. This influence can be seen across the board as many decisions now seem to favor only a select few, forgetting about the ramifications for the many.

Randall submits that building firewalls and Chinese walls will abolish the synergies between financial and non-financial institutions. In addition, Randall also points out that government should restrict the areas where synergies is not required to cancel out by building Chinese walls and where the risk is acceptable rather than stop supporting creditors of fragile banks. Randall suggests that there should be barrier for non-banks to enter into banking sector in order to avoid the enlargement of safety net (Randall, 63-74).

Differences in banking regulations across borders permit the most efficient channeling of funds from lenders to borrowers, leading to increased investment and thus increased GDP. Therefore it is imperative that policy makers prudently evaluate the possible consequences and benefits of harmonized banking regulations, as demonstrated by similar regulations instituted domestically, before any such endeavor is embarked upon.

The overall development of an economy is a major factor that has significant impacts on the development of the economy's financial markets. Since well-functioning financial systems offer good and easily accessible information, they lower the costs of transaction. This in turn enhances resource allocation and strengthens economic growth. The financial services industry consists of various systems such as stock markets and banking systems that enhance growth and help in poverty reduction. However, commercial banks tend to dominate the financial system during low levels of economic development while stock markets become more active and effective during periods of high levels of economic development ("Financial Sector", n.d.). The other important systems in the financial services industry include sound macroeconomic policies, shareholder protection, and good legal systems.

In terms of world markets our major banks are also strong and provide local market stability. The industry does see high barriers to entry but there are competing products and services offered from intermediaries such as mortgage brokers and other loan providers. These provide competition to banks to keep them slightly honest and reduce their competitive advantage.

The main goal of the 4 banks is to increase their tangible book value and earnings per share by increasing Net Interest Margin (NIM) via organic growth. There appears to be significant difference in the geographical locations where the global banks see growth and a national bank such as Valley National Bank sees future growth prospects. There is also parity in all 4 banks opinions as to where the fastest growing economic sectors tend to

Financial regulation is necessary and without an efficient set of regulations a country could see rises in unemployment, interest rates, and the deterioration of financial intermediaries. With the globalization of the financial industry, it becomes more and more common for businesses to seek financing outside of their county 's boarders. These innovations in the financial industry stress why it is so important for regulations to be created and changed to reduce risk and asymmetric information in financial systems.

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

Today, it is considered to be a common knowledge, that the deregulation of domestic financial sector and opening of capital account of the balance of payments played a major role in the recent economic crisis of 2007-08. Policies, that have been stated above can be put together and named as the liberalization of the capital account. Liberalization stands for lessening of government regulations and restrictions in the economy. It offers a certain sector of the economy an opportunity to compete internationally. However, there are a number of risks connected with liberalization, which will be discussed later in this paper. Thus, the question is as follows: is liberalization worth the risk, or a wise implementation of capital controls leads to potentially more positive outcomes for the global economy?

As contemporary literature has shown, since the 1980s the world has experienced a strong wave of financial integration, which – through capital-market liberalization – seems to have played a vital role in facilitating economic growth, in opening up national capital accounts and in boosting the cross-border movements of goods, services, technology, labour and capital (Elson, 2011; Caprio et al., 2012).

International Banking can be defined as banking transactions crossing national boundaries. The activities involves like international lending; claims of domestic bank offices on foreign residents, claims of foreign bank offices on local residents, claims of domestic bank offices on domestic residents in foreign currency are the major activities involved in International Banking. The evolution of banking history dates back to 2000 BC in Assyria and

Ben Ukaegbu and Isaiah Oino (2014) conduct a comprehensive field of study on the impact of foreign bank entry on domestic banking in a developing country from the perspective of Kenyan. Using 19 banks level data from 2001 to 2009, the authors examine the penetration of foreign banks into Kenya and the impact on domestic banking operations. Objective of their study is to examine the impact of foreign bank entry on domestic banking and to evaluate how the entry of foreign impacts access to credit. The study used percentage of foreign banks as a dependent variable which may influence the independent variables such as profitability of domestic bank, net interest margin, loan loss reserve ratio, cost income ratio, Tier 1 capital, average lending rate, private credit to gross domestic product, inflation and percentage of non-performing loan of domestic banks. Regression analysis has applied to assess the impact

A research report published by Asian Development Bank in 2013 gives clues about the vision of ASEAN to pursue banking sector integration. The report presents three fundamental dimensions of a framework that integrates the banking sector. These are: reducing entry barriers for foreign financial