International financial services: determinants of banks' foreign assets held by non-banks [An article from: Journal of International Financial Markets, Institutions & Money]

This digital document is a journal article from Journal of International Financial Markets, Institutions & Money, published by Elsevier in 2004. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
Banks' foreign assets held by non-banks are part of the growing volume of international trade in financial services. This paper investigates, for the first time, the determinants of banks' assets held by non-banks for Germany, Japan, the United Kingdom and the United States. The underlying model used to measure banks' foreign assets held by non-banks in this study, is based on those models which have measured the determinants of banks' total foreign assets and international inter-bank activities. The empirical results of this model suggest a positive relationship with foreign direct investment in banking and banks' foreign assets held by non-banks. Other significant factors identified include bilateral trade, the value of national income, and the real interest rate differential. Furthermore, banks' foreign assets held by non-banks are found to be significantly related to the respective level of inter-bank dealings, such that a restriction on the overall amount of activities exists. Finally, global bank flows of opposite directions are found to be positively correlated, highlighting the fact that the perceived risk of foreign lending is reduced by simultaneous increases in banks' foreign liabilities.