Regulation, Trade Agreements, Consolidation and Integration in International Banking

While a significant proportion of deregulation of banking markets was implemented in the 1980s there was a closely associated re-regulation in the form of international banking industry accords. The European Union member states’ financial markets were principally reformed by legislation, that is, through directives and recommendations. A single European financial market is due to be in place in 2005. The principle of home country control was introduced along with the equalisation of banking activities by specifying the permitted banking activities. By allowing banks from other member states to provide commercial and investment banking services in other member states, universal banking was effectively introduced as the standard type of banking, as member states were obliged to allow their indigenous banks to provide the same range of services or they would have been at a competitive disadvantage. The North American free trade agreement, NAFTA, was signed by the United States, Canada and Mexico. A separate Annex on Financial Services was agreed as part of the Uruguay round of the General Agreement on Tariffs and Trade, GATT, in the General Agreement on Trade in Services, GATS. Along with liberalisation in trade in banking services reducing the level of barriers to market access by foreign banks and the reform of banking systems through deregulation and re-regulation there has been the accompanied process of securitisation, which has progressed the process of globalisation and integration in banking. The recent increase in mergers between and acquisition of banks within and between countries has been mostly due to the single financial market and economic and monetary union in Europe, de-regulation in the United States and de-regulation, as well as, restructuring in Japan.