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Foreign direct investment in the financial sector - experiences in Asia, central and eastern Europe and Latin America

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  • Bank for International Settlements

Abstract

Introduction In March 2004, the Committee on the Global Financial System (CGFS) published a report entitled Foreign direct investment in the financial sector of emerging market economies (the Cumming Report). The report discusses how the surge in financial sector foreign direct investment (FSFDI) over the past decade has been instrumental in integrating emerging economies into the global financial system. On the one hand, integration has brought substantial benefits to host countries' financial systems in terms of efficiency and stability. But, on the other hand, it has also brought to the forefront issues related to the management of country risk and the assessment of conditions in host country financial systems. The report also looks at risk management issues for investing financial institutions as well as for authorities in charge of financial stability and public policy in general. At the same time, the report acknowledges notable differences in the involvement of foreign-owned financial institutions in the financial sectors in emerging Asia, central and eastern Europe (CEE) and Latin America. Recognising the potential relevance of regional factors in the assessment of FSFDI, the CGFS organised follow-up workshops to explore issues raised in the CGFS report with a broader range of central banks in these three regions. The workshops were held in Seoul (hosted by the Bank of Korea), Mexico City (hosted by the Bank of Mexico) and Warsaw (hosted by the National Bank of Poland) in 2004. They were chaired by Roger W Ferguson Jr, Chairman of the CGFS and Vice Chairman of the Board of Governors of the Federal Reserve System. In total, senior representatives from 37 central banks participated in the workshops, together with a number of representatives from the private sector. This paper summarises the main findings of the workshops. The document is organised according to the general themes discussed: (1) experiences with FSFDI; (2) issues for private financial institutions operating in emerging market economies; and (3) issues for the authorities in charge of financial stability and public policy. Parts 1 and 3 highlight commonalities and differences in views. Part 2 presents the main points made in separate sessions with the private sector at each workshop.

Suggested Citation

  • Bank for International Settlements, 2005. "Foreign direct investment in the financial sector - experiences in Asia, central and eastern Europe and Latin America," CGFS Papers, Bank for International Settlements, number 25, december.
    • Handle: RePEc:bis:biscgf:25
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    Citations

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    Cited by:

    1. Michael Pomerleano, 2011. "Developing Regional Financial Markets – the Case of East Asia," Chapters, in: Ulrich Volz (ed.), Regional Integration, Economic Development and Global Governance, chapter 9, Edward Elgar Publishing.
    2. Peter R Haiss & Wolfgang Rainer, 2012. "Credit Euroization in Eastern Europe: The ‘Foreign Funds’ Channel at Work," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 54(3), pages 471-505, September.
    3. Süer, Ömür & Levent, Haluk & Şen, Süleyman, 2016. "Foreign entry and the Turkish banking system in 2000s," The North American Journal of Economics and Finance, Elsevier, vol. 37(C), pages 420-435.
    4. Muhammad Suhail Rizwan & Muhammad Moinuddin & Barbara L’Huillier & Dawood Ashraf, 2018. "Does a one-size-fits-all approach to financial regulations alleviate default risk? The case of dual banking systems," Journal of Regulatory Economics, Springer, vol. 53(1), pages 37-74, February.
    5. Minyan Zhu, 2012. "The impact of foreign bank entry in emerging markets: knowledge spillovers or competitive pressure?," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2012-04, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    6. Fungáčová Z. & Solanko L., 2009. "Risk-taking by Russian banks: do location, ownership and size matter?," Higher School of Economics Economic Journal Экономический журнал Высшей школы экономики, CyberLeninka;Федеральное государственное автономное образовательное учреждение высшего образования «Национальный исследовательский университет «Высшая школа экономики», vol. 13(1), pages 101-129.
    7. Andrea M Maechler & Srobona Mitra & Delisle Worrell, 2010. "Decomposing Financial Risks and Vulnerabilities in Emerging Europe," IMF Staff Papers, Palgrave Macmillan, vol. 57(1), pages 25-60, April.
    8. Fungáčová Z. & Solanko L., 2009. "Risk-taking by Russian banks: do location, ownership and size matter?," Higher School of Economics Economic Journal Экономический журнал Высшей школы экономики, CyberLeninka;Федеральное государственное автономное образовательное учреждение высшего образования «Национальный исследовательский университет «Высшая школа экономики», vol. 13(1), pages 101-129.
    9. repec:zbw:bofitp:2008_021 is not listed on IDEAS
    10. Philip Turner, 2006. "The banking system in emerging economies: how much progress has been made?," BIS Papers chapters, in: Bank for International Settlements (ed.), The banking system in emerging economies: how much progress has been made?, volume 28, pages 1-9, Bank for International Settlements.
    11. Bank for International Settlements, 2009. "Capital flows and emerging market economies," CGFS Papers, Bank for International Settlements, number 33, december.
    12. Mr. Rupert D Worrell & Andrea M. Maechler & Ms. Srobona Mitra, 2007. "Decomposing Financial Risks and Vulnerabilities in Eastern Europe," IMF Working Papers 2007/248, International Monetary Fund.

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