The decade before the 2007–09 global financial crisis was characterized by a significant increase in bank globalization, which also coincided with dramatic increases in bank size. International banks became the cornerstone of many financial systems around the world, also in developing countries. Proponents of international banking emphasized the potential gains in terms of much-needed capital, know-how, and technological improvements that foreign banks bring, leading to more competitive and diversified banking systems, improved resource allocation, and greater financial and economic development.
However, the global financial crisis has led to a significant re-evaluation of this conventional wisdom. With the crisis, there was a backlash against globalization in general, and the emphasis shifted to the role international banks can play in shock transmission. Developing countries felt the impact of retrenchment by global banks. Global banks were criticized for taking excessive risks. Financial Stability Board (FSB) and the G20 voiced concerns about how to deal with the resolution of too-big-to-fail banks. As a result, regulations and restrictions got stricter in many countries, particularly in developing countries, further contributing to the retrenchment kicked off by the crisis.
Global Financial Development Report 2017/2018: Bankers without Borders, the fourth in the series, brings to bear new evidence on the debate on the benefits and costs of international banks, particularly for developing countries. It provides figures on recent trends, emerging patterns since the global crisis, and evidence on the economic impact of international banking. The goal is to synthesize evidence and data to contribute to the policy debate on international banking.