International Banking

International Banking in the United States

The expansion of trade in recent decades has been paralleled by the growth of multinational banking. Banks have historically financed international trade, but the notable development in the last 30 years has been the expansion of branches and subsidiaries that are physically located abroad, as well as the increased volume of loans to foreign borrowers. In 1960 only 8 U.S. banks had foreign offices. By 1987, about 150 U.S. banks had about 900 foreign branches.In 2013, after a growing increase, in several countries the pace has moderated.

Similarly, the number of foreign banks with offices in the United States increased almost three-fold during the 1970s and 1980s. Most of these banks were business-oriented banks, but some have also engaged in retail banking. In 1978 the U.S. Congress passed the International Banking Act, which imposed constraints on the activities of foreign banks in the United States, removing some of the advantages they had acquired in relation to U.S. banks. Foreign banks have also penetrated the American market by acquiring ownership of existing banks.

The growth of the Eurodollar market has forced major U.S. banks to operate branches not only in Europe but also in Asia.

Specially in the late 20th century, the world’s banking system played a key role in the recycling of petrodollars, arising from the surpluses of the oil-exporting countries and the deficits of the oil-importing nations. This activity, while it smoothed international financial arrangements, proved worrisome as foreign debtors find it more difficult to repay outstanding loans.

More about Banking

Commercial Banking in the United States

Commercial banks are the most significant of the financial intermediaries. Read more about Commercial Banking in the U.S. here.

Thrift Institutions

Savings and loan associations (SLAs) and savings banks are similar but separate financial institutions. Both were patterned after cooperative movements in Scotland and England. See more about Thrift Institutions here.

European Banking

European banks engage in some activities prohibited to banks in the United States. Commercial banks in Europe tend to be more business oriented. Read more about Banking in Europe here.

Role of Central Banking

The foremost monetary institution in a market economy is the central bank. These are usually government-owned institutions, but even in countries where they are owned by the nation’s banks (such as the United States and Italy), the responsibility of the central bank is to the national interest. Read more about central banking here.