The foreign banks have continuously been playing a crucial role in the overall development of the banking sector, especially in developing countries. Since the globalisation has worked in the favour, the presence of foreign banks has been displaying a positive impact on the efficiency of banks as well as contributing a healthy competition in the domestic banking sector.
The assignment help experts at Online Assignment Expert were involved with the research methodology related to such subject and have found that foreign ownership has a stabilising impact in developing countries due to the following reasons:
Foreign banks have typically less sensitive feeling to conditions of the home country.
Foreign banks pertain to easier access to international markets. In situations of financial difficulties, these banks can act as parent banks and can emerge victoriously.
The cost of restructuring the banks have much reduced because of the capital influx added to by foreign investors.
Foreign banks are the experts in managing risks as well as stand erect in conforming to the traditions of corporate governance.
But before going further, let us look at what foreign banks bring in terms of profitability and efficiency.
Let us look at some of the facts and data reports as researched.
It has been found that the conditions of foreign banks were better as compared with the local banks. There have been reports that 40% of the foreign banks in Pakistan were running into deficit. But, when it was compared to domestic banks, capital efficiency was a lot better.
The reports suggest a negative curve of credit risk with the loan concentrated for banks in Malaysia. This typically meant that as the credit risks are higher, the loan repayment exposure becomes more that eventually results in low profitability. Furthermore, income from non-interest sources, capital size, and operating expenses have indeed a much more positive effect on the profitability of banks. If a bank has more capital, then they will possess higher profitability.
There have been major discussions that were involved through the profitability of such banks which will be increased through a system of well-organised asset management and economic growth. It is evidently argued that high credit risk of advances impacts towards a lower level of banks’ profitability. Another micro variable also penetrates the profitability of banks – Gross Domestic Product (GDP). As per different micro indicators, the profitability is determined positively with the factors of the size of the bank and operating efficiencies. Also, profitability has a negative impact on credit risk. If you have some essays or reports to write on such topics, our essay and report writing help services are right in front of view.
It has been evidently discussed above the efficiency of foreign banks was good when it got compared with several domestic banks. This could, however, be dependent on the types of foreign banks as well as different types of host markets. The reports tell us foreign banks do not perform well in developed countries because they are put under fierce competition which causes a decrease in the profits. Greenfield banks, which were foreign-owned with a low degree of risk when it is compared with other foreign banks in Asia, Latin America as well as Eastern and Central Europe.
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