Cross-border banking: threat or opportunity to economic growth and financial stability

Abstract

Cross-border banking was a major issue in economic growth and stability of the financial sector until banks became large in size, began to engage in international transactions directly from their home countries and later by establishing or acquiring banks across their borders, and the level of international activities of banks intensified through complex products that increased exposure to systemic risk and possible losses to the economy. There is evidence on both sides to the argument that cross-border banking is both a threat and an opportunity to economic growth and financial stability. This paper argues what must be done to ensure that the opportunities outweigh the threats.