Banking Globalization and Global Imbalances Essay

Banking Globalization and Global Imbalances - Essay ExampleAs such, in order for a cashbox to operate profitably in the foreign market, it must be able to gain or realize gains that be non available to local competitors. These gains to be realized when a bank is operating in foreign financial sector usually stem from geographical risk diversification, competitive and comparative value factors and efficiencies that are not attained when operating exclusively in the local markets.On comparative gains, better intermediation technologies, superior management quality, and innovative products are among the factors frequently cited by both the internalization theory and the electric theory of multinational corporations (De Haas & Lelyveld 2010). However, these factors are not permanent in the case of banks diversifying internationally base on the assumption that financial crockeds usually have intangible assets that cannot be imitated and management quality is easily transferable. In formation is a crucial comparative advantage for a bank to operate in abroad markets. Organizations prefer doing business with a less number of banks to ensure that their sensitive financial information is not revealed to too many financial firms. As such, once a bank establishes a relationship with an organization, it has a competitive advantage in serving the firms trading operations in the foreign markets. The increased importance of information in the banking sector has resulted to the shift from cross-border borrowing and lending towards the foreign banks local operations in the emerging countries (Mariotti & Piscitello, 2010).One of the best ways of exploiting comparative advantages arising from the private information in foreign markets is following the client. This means that banks usually expand in the countries where their client choose to invest so that they can be able to offer them services that they need.