CHAPTER 14

GLOBAL BANKING
 Many years ago, international business was mainly an
international trade. Agricultural countries exported raw materials
to the industrial countries. The finished products were then sold
back to the agricultural countries.
 Development of Global Banking

The roots of transnational banking had a colonial

beginning. Colonial empires, mostly European countries like
Great Britain, France, and Spain, established the branches or
offices of their financial institutions in their colonies in order to
facilitate trade.
 The Biggest Banks in the World

For the first time, the 10 biggest banks in the world were
Japanese as of March 1989. American and French banks have
fallen out of the top ranks. Dai-Ichi Kangyo Bank Ltd was the
biggest bank in the world with an asset of $387 billion.
 The 20s Biggest Banks as of March 1989

1. Dai-Ichi Kangyo Bank Ltd., Tokyo 386,937 1

2. Sumitomo Bank Ltd., Osaka 376,088 2
3. Fuji Bank Ltd., Tokyo 364,044 3
4. Sanwa Bank Ltd., Osaka 348,358 5
5. Mitsubishi Bank Ltd., Tokyo 343,593 4
6. Industrial Bank of Japan, Tokyo 257,578 6
7. Norinchukin Bank, Tokyo 241,947 7
8. Tokai Bank Ltd., Nagoya 225,121 9
9. Mitsui Bank Ltd., Tokyo 219,666 11
10. Mitsubishi Trust & Banking Corp. 210,266 12
11. Credit Agricole Mutuel, Paris 207,938 8
12. Citicorp, New York 203,827 10
13. Sumitomo Trust & Banking, Osaka 196,516 14
14. Banque Nationale de Paris 194,316 13
15. Barclays Pic, London 198,198 19
16. Mitsui Trust & Banking Co., Tokyo 183,873 15
17. National Westminster Bank, London 178,343 21
18. Credit Lyonnais, Paris 176,663 17
19. Taiyo Kobe Bank Ltd., Tokyo 178,670 20
20. Bank of Tokyo Ltd. 173,373 24
 Expansion of Global Banking

One major factor in the rapid expansion of transnational

banks is the growth of transnational corporation. These
transnational banks support global manufacturing and trade of the
transnational corporations. On the other hand, the latter provides
good business to the transnational banks.
 Another factor is the supply or growth of the Eurodollar
market. Such particular type of currency market was organized in
the 1950s when British banks started accepting US dollar
deposits and lend them. A few years later, other banks, including
US banks, joined in such business. This practice of accepting US
dollars for deposits and lending them to borrowers outside the
United States is called eurodollar market.
 Transnational Banks and Transnational Corporations

There is a very close combination and cooperation

between financial and industrial business. About 80% of the
capital structure of 1,000 Japanese major companies come from
bank loans. In Japan, the zaibatsu (large business organization)
has been responsible in funding the early development of the
country. It covers mining, insurance, banking and other industrial
and commercial businesses.
 Global Banking in the Philippines

The Philippines is a part of the global banking system.

The transnational banks constitute a major part of the Philippine
financial system. These global financial institutions consider our
country a good market for lending and even participate actively in
the affairs of the Philippine financial system.
 Top transnational banks of the United States, Japan,
Canada, British, France, and Spain operate in the Philippines
either through branches, offshore banking units, representative
offices and/or equity investments in domestic financial and non-
financial enterprises.
American banks (top ten)
– Bank of America
– Citibank
– Chase Manhattan
– Manufacturers Hanover
– JP Morgan
– Continental Illinois
– Chemical Bank
– First National Bank of Chicago
– Security Pacific Bank
– Bankers Trust
Japanese banks
– Bank of Tokyo
– Fuji Bank
– Mitsui Bank
– Taiyo Kobe
– Export-Import Bank of Japan
– Mitsubishi Bank
– Sanwa Bank
 Penetration of TNBs into the Philippine Financial System

During the postwar period, there was a conscious effort to

limit the participation of foreign banks to the four branches of
transnational banks which had been established since colonial
era. These banks are Chartered Bank (British) organized in 1875,
Hongkong & Shanghai Bank (British) in 1875, Citibank
(American) in 1902, and Bank of America in 1947.
 Participation of TNBs

Branches. The four branches of transnational banks in the

Philippines were established to support and facilitate British and
American business interests. The Bank of America put up its
Manila branch in 1947 primarily to finance trade between the
United States and the Philippines.
 Representative offices. A representative office is
composed of one foreign executive who represents his
transnational bank in the Philippines. He is assisted by his
secretary and perhaps by one or two Filipino employees who are
very knowledgeable about the Philippine financial system, and
have good contacts.
 Equity investments. Not a few commercial banks,
investment houses, and financing companies have foreign bank
capital.

Offshore banking. This means doing business with non-

residents, that is, the clients are not based in the Philippines.