Technological advances have increased the need for banks in the global supply chain, while the efforts of developing countries to integrate trade and investments with the world economy have increased demand for international banking services. Moreover, financial reforms in developed and developing countries have facilitated the banking sector to operate in other countries as well. The internationalization of banking activities naturally contributed to the development of integration in the countries. Technological advances also strengthen the influence of economic integration on international banking. With the ease of access to information technology has accelerated the development of economic and statistical models. The development of models related to risk management has created positive results on banking practices and reliable payment systems have increased the efficiency of the intermediaries in the financial system.
However, with financial integration, the transition of shocks between countries has become easier. Indeed, in the global financial crisis, international banks have played a central role in deepening the crisis. The positions they hold in the hands of many banks scattered around the world have facilitated the transition of the financial crisis from one country to another and the losses on international transactions have affected the capital of the banks making it difficult to enter the funding. The deepening crisis has made it hard for the management of international banking and the shortage of liquidity in the markets emerged. In resolving the crisis, both international banks and regulatory authorities have advocated the need for country-based interventions to reduce the effects of the crisis.
Despite the shortcomings of the global financial crisis, the development of international banking activities increases the importance of the international dimension of financial stability and allows entrepreneurs to enjoy greater use of financial services. The development of banking activities among countries affects retail banking, financial system, economic growth and global integration positively.
International banks have recognized the shortcomings of both the business and risk management issues with the global financial crisis. At the same time it appeared that there were structural gaps in regulatory issues. With the financial crisis, banks’ business models need to strengthen risk and liquidity management. Regulations are needed to strengthen risk management, reduce herd psychology and strengthen financial stability. The regulatory framework should encourage international banks to grow through competition. Transparency and systematic monitoring of key activities will ensure that the financial integration of developed and emerging markets is aligned with the global objectives of the regulations, if handled with these arrangements.