Implications of the Globalization of the Banking Sector: Discussion

The Financial Times recently reported that the largest brewer in England was about to fall into Belgian hands. Bass Brewing was being acquired by Belgium’s Interbrew for the princely sum of $3.45 billion. With this transfer of ownership, 220 years of brewing under British ownership was about to come to an end. As a result, half of the British beer industry was now going to be in foreign hands, something the FT described as “unthinkable a few years ago.” Similarly, not long ago the British hunting and shooting magazine, The Field, lamented the purchase of Britain’s oldest and most elegant shotgun manufacturer by a French firm. It seems that nothing in the commercial world is sacred anymore! Ownership of large or prestigious enterprises by foreigners is something that goes down hard in most countries, never more than in banking. But the reasons differ. Banking institutions have been and continue to be central to economic development, even in countries with well-developed capital markets.1 The greater the information and monitoring problems in lending, the greater has been the role of banks. This is especially true for small and medium-size firms without access to capital markets and where information is “impacted” and difficult to credibly transfer. Banks have also been central to the direction of economic development by governments, to the protection of nonbank firms from foreign takeover, to the sharing of risks with commercial and nonbank financial firms, and, sadly but true enough, to the intricate and pernicious web of relationships with politicians in search of illicit financing. Banking in