The Origins and Evolution of Global Banking

Trends for the 1990s

Just as the 1960s and 1970s belonged to the U.S. banks, and the 1980s to the Japanese banks, the 1990s may be the decade of East Asian banks and European banks. The 1980s have been a period of fast growth for the so-called East Asian "tigers": Hong Kong, Taiwan, Singapore, and South Korea. Development and growth of high tech manufacturing enabled the technological transformation of their economies within a decade - a process that took Japan fifty years to attain. As exports of high tech products rapidly expanded, the Asian "tigers" realized significant trade surpluses which were funneled to the Eurocurrency market, the standard source of funds for major corporations. A large part of these funds went to finance corporate restructurings in the United States and Europe where the age of consolidation seems at hand.

European banks are strong contenders for global dominance. Their strengths include solid capital bases, strong balance sheets and control of the home market. The Second Banking Directive of 1989, which came into effect on January 1st, 1993, permits banks to operate throughout the European Community (EC) with a single banking license issued by the bank's EC home-country. Economic integration and the move towards a monetary union by the turn of the century are creating important incentives for the consolidation of the financial sector. Banks are trusted as the catalysts to this consolidation. The model for banking under the EC regime is the universal banking system of Germany - fully integrated financial conglomerates that provide their customers with commercial and investment banking, leasing, and insurance services. With many European countries having no effective regulatory barriers to a comprehensive coverage of financial services, the European banking system is rapidly becoming universal.