Financial Markets and Institutions (2-downloads)

Bank

Assets (U.S. $ millions)

1. UBS AG, Switzerland

1,963,227

2. Barclays, UK

1,951,041

3. The Royal Bank Of Scotland Group, UK

1,705,680

4. Deutsche Bank AG, Germany

1,485,008

5. BNP Paribas, France

1,483,934

6. Mitsubishi UFJ Financial Group Inc, Japan

1,362,598

7. ABN AMRO Holding NV, Netherlands

1,301,508

8. Societe Generale, France

1,261,657

9. Credit Agricole SA, France

1,251,997

10. Bank of America NA, USA

1,196,124

Source:

http://www.allbanks.org/top_banks.html

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expected to meet reserve requirements, for example. The passage of the International

Banking Act of 1978, however, put foreign and domestic banks on a more equal foot-

ing. The act stipulated that foreign banks could open new full-service branches only

in the state they designate as their home state or in states that allow the entry of out-

of-state banks. Limited-service branches and agency offices in any other state are

permitted, however, and foreign banks are allowed to retain any full-service branches

opened before the act was ratified.

The internationalization of banking, both by U.S. banks going abroad and by

foreign banks entering the United States, has meant that financial markets through-

out the world have become more integrated. As a result, there is a growing trend

toward international coordination of bank regulation, one example of which is the

1988 Basel Accord to standardize minimum bank capital requirements in industri-

alized countries, discussed in Chapter 18. Financial market integration has also

encouraged bank consolidation abroad, culminating in the creation of the first trillion-

dollar bank with the proposed merger of the Industrial Bank of Japan, Dai-Ichi Kangyo

Bank, and Fuji Bank, announced in August 1999, but which took place in 2002.

Another development has been the importance of foreign banks in international bank-

ing. As is shown in Table 19.4, in 2009, nine of the 10 largest banking groups in the

world were foreign.

S U M M A R Y

1. The history of banking in the United States has left us

with a dual banking system, with commercial banks

chartered by the states and the federal government.

Multiple agencies regulate commercial banks: the

Office of the Comptroller, the Federal Reserve, the

FDIC, and the state banking authorities.

2. A change in the economic environment will stimulate

financial institutions to search for financial innovations.

Changes in demand conditions, especially an increase

in interest-rate risk; changes in supply conditions, espe-

cially improvements in information technology; and the

desire to avoid costly regulations have been major 

driving forces behind financial innovation. Financial

innovation has caused banks to suffer declines in cost

advantages in acquiring funds and in income advan-

tages on their assets. The resulting squeeze has hurt

profitability in banks’ traditional lines of business and

has led to a decline in traditional banking.

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Chapter 19 Banking Industry: Structure and Competition