Globalization has made the world smaller. Trade barriers have fallen yet the full effects of globalization are yet to be visible especially in the developing countries. Globalization has also increased the risk appetite which has resulted in financial meltdown in previous decades.
With the growth of new technologies, the expanding global marketplace, people, goods and services are crossing borders at ever-increasing rates. Economic globalization, aided by the growth of new technologies, has provided new opportunities for economic growth. This has created enormous economic and social benefits to some countries, but not to others, and disproportionately to some groups within those countries. It has also reduced the regulatory authority of national and sub-national governments (the public sector) and increased the power and influence of trans-national corporations (the private sector). The planet may be shrinking as far as business interests are concerned, but the gap between rich and poor within and between most nations is going in the opposite direction.
[...] Superimposed on these institutions, there are powerful world economic groupings (such as the US Government, the EU and the Japanese Government) which can heavily influence both the scope of globalisation as well as who will be the beneficiaries. Global companies can also have sufficient weight to influence governments to negotiate in their interest. Global banking is highly significant because it plays a key part in the international integration of capital markets. It helps to ensure that financial conditions in individual countries are strongly influenced by conditions in the world at large. [...]
[...] Because many Latin American countries opened their markets during the 1990s, and because they have experienced exchange rate and banking crises as well as severe fluctuations in their macro economies over this period, Latin American countries provide a good laboratory for understanding the effects of foreign bank penetration on their economies. They find that foreign banks viewed the economic problems as providing opportunities to expand, either by acquisition or by internal growth of existing subsidiaries. Moreover, Latin America countries have adopted different strategies towards foreign banks. [...]
[...] There are some steps have been taken as measures which stand out for their negative impact on the banking system are as mentioned: In November 2001, the government exchanged government bonds held by banks for illiquid government bonds. The government imposed a control on the interest rate paid on deposits accelerating the run of the banking system. In the first quarter of 2002, the government declared default on its debts and the devalued the currency. The government has announced a modification of the indexation index to be applied to mortgage while maintaining the original indexation to inflation on most bank liabilities. [...]
[...] Conclusion Building on what has been said it can be concluded now that globalising the banking system is very important and necessary for the economic and financial growth. Most of financial institutions extended their businesses and it became so global to cope with the globalization, and also developing countries have to establish an effective regulatory banking system to attract external investment. Moreover, weaknesses in developing countries' financial sector function to cope with financial repression and the escape of financial resources away still serious problems. [...]
[...] Although Argentina had accomplished much in reforming its economy and introducing new investment models and international best practices into its real estate markets, it had undermined its success by borrowing dollars on the international market to finance heavy, sustained deficit spending. During most of 2001, Argentina faced progressive deterioration in its perceived Creditworthiness as well as increased doubts about the government's capacity to maintain its exchange rate arrangement In fact, Argentina currency crisis and economic depression according to (Kurt Schuler) have been caused by the bad policies of its government- not by banks, speculators, and the international monetary fund. [...]
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