This essay attempts to examine the concept and trend towards globalisation of the banking system. The attempt further analyses the implication and impact of this on developing countries against fears which erupted in some of the countries such as Ghana where attempts by the present Government between 2003 and 2004 to privatise the state?s Ghana Commercial Bank was met with massive public resistance. The effort is also against the background of the banking crises, which erupted in many emerging economies following the latter's freeing of financial borders to global banking. The effort also dilates on other pertinent issues which will try to focus on the growing debate surrounding foreign banks in view of the mixed interpretations accorded their operations over the past decades in most emerging markets.

The Debate

Political and economic theorists as well as viewers of the international financial landscape have argued that developing countries did use several economic policy measures to control foreign bank participation in their domestic economies prior to the 1990's advent of financial liberalisation. It is also argued that these measures were signs, which sufficiently suggested feelings of unwillingness, uncertainties and suspicions on the part of these emerging economies to open up their domestic systems for external participation following political independence. Against this background however, there is also the new era of globalisation, which compelled an increasing trend towards integration of economies in terms (Birdsall, 1999) not only of information and technology, goods and services, but, a process of the internationalisation of the banking system, dating back to 1970's. The feature, it is arguable, thus effectively triggered an avalanche of rapid innovations in the capital markets, securitisation and growth of direct finance. Its attendant operational environment, no doubts, also affected and influenced the organisation and performance of international finance, banking and the economic situations of nations. As a historical antecedent, internationalisation of the banking industry between the time and 1970's and the 1990's (Rana, 2002), was also witnessed by a gradual, progressive relaxation of capital control by poor nations.

Debt Crises and International Capital

Added to the above was the economic policy advocacy of the International Monetary Fund (Driscoll, 1993) purported to flexibly respond to the global changing needs of its growing membership. Chief among them, being the challenges of the 1980's debt crises with a number of heavily indebted developing countries unable to repay what they owe to commercial banks, and to governments of member countries. As argued by Drsicoll "global banking influenced and encouraged the need to stimulate inward portfolio and direct investment within economies". As a global demand, the policy also saw the creation of various regional bodies, among others, the European Monetary Union (EMU) with the aimed of adopting what was eventually termed the Euroland.

In theory, globalization of the banking system means opening up of the domestic financial market for foreign participation. It also represented implications of rapid growth in overseas portfolio investment, such as the establishment of mutual funds, insurance firms, pension funds etc. Having been led mainly by UK and US institutional investors, increases in cross-border activity in the financial sector, bank branching, alliances and mergers, became common place. Financial globalisation is thus understood to be of advantage to the world economy since it can facilitate access by borrowers to a larger pool of global savings and subsequently enhancing investment opportunities. Global banking, it is argued, bring about positive impact in the broad context of innovativeness through the process of customer satisfaction, cost reduction, improvement in product and services and results in risk and activity expansion, especially in poor countries.

For example, in Latin America (Del-Negro and Kay, 2002), it is believed that the internationalisation of the banking sector has ushered in a new era. The authors maintained "one of the main benefits of the presence of foreign banks in Latin America was that the global banks produced a decline of systemic risk". An empirical instance was the case of Argentina which banking payment collapsed due to negative systemic risk factors in its banking system with a low of 43% only in foreign equity. Thus there is an economic rationale for this optimism for foreign bank entry into developing economies. It is argued for example by experts that if an intermediation sector is purely domestic, any financial crises erupting in that economy, such as a major currency depreciation or government bankruptcy, is a systemic shock. Resultantly, this could cause the collapse of that entire economic system, researchers argued. There is also a rationalization in theory which suggest that if international banks with the advantage of huge capital base and internationally diversified portfolio of local banking capital operate in a developing country, the degree of bank runs to be suffered by such an economy could reduce and hence a boost to economic growth.

Other arguments further abounds that with the globalisation of the banking industry, developing countries are better infused with adequate access to improved quality and efficient availability of financial services to customers. In Swaziland and Lesoto for example (Ipangelwa, 2001), through the involvement of foreign operations in those economies, investment is facilitated in certain business areas with high cost recovery. Ironically, these initial high costs acted as a disincentive and normally unattractive for local banking support. Another impact is that internationalisation of the banking industry increases employment, leading to increased consumption, idustrialisation and high productivity. Arguably foreign banks are also credited with increased revenues to developing states through taxation, which in turn transforms into the provision of needed social services by governments. For example, prior to the trend towards globalisation of the banking system, foreign (McCullum, 2000) involvement in Tanzanian, and Ethiopian economies, was 5% and 2% respectively. The trend did however, change with Tanzania, currently recording a high of 56% foreign banking attraction in proportion to domestic banking. Within a similar context, Ethiopia has also become a source of an anticipated surge of a high percentage attraction. The implication is that this is expected to result in a contagion or spread of economic benefits, such as effective risk management, transparency and efficient financial management through the legacies of technological transfer into such economies. Other benefits (Cho, 1990) include an engendered domestic competition resulting in improved financial system architecture and engineering such as increases in accounting standards, effective auditing, adequate financial services marketing and sound banking management.

Global banking does not only provide investment fund for poor economies, it is argued, (Osunsede and Gleason, 1992). Foreign banks improve domestic economies through the system's potentials to offer expertise, establishing appropriate financial and economic structures which are indispensable for the smooth functioning of a free-enterprise system. By the injection of financial and human expertise by international banks, developing countries are assisted to create a congenial atmosphere for economic growth. For example in 1985, multinational banks in conjunction with other donor agencies assisted and lent at concessionary interest rates to emerging states. In Ghana for example this facilitated developmental processes in the energy, transportation and communication sectors of the economy. Countries such as Nigeria and the then peaceful Ivory Coast transformed such credits into infrastructure to reform their economies ostensibly to eliminate institutionalised mismanagement and improved growth rate among others.

Reservations and Fears

Having noted the above contribution representing the roles global banking play in development economies, the question is whether that is all what there is in the system's relationship with least developed countries (LDC's)? This can relate further to another concern regarding the extent to which global banks takes stake in influencing growth patens in developing economies. Foreign entry into the economy of developing countries, as outlined above, is essential. International banks can also constitute strong stimuli for financial liberalization.

However, the above gains notwithstanding, participation of international banks in emerging economies may be argued to have its devastating socio-economic impact on such countries. Viewed as integral to the World Trade Organization (WTO) protocol on the General Agreement on Trade in Service (GATS) and accepted as such by Third World nations (Communication and development Research, ibid.) the free operation of foreign banks in the latter's economies can have its negative implications. It may also bring to the fore a re-examination of the protracted disagreement between Ghanaian government officials and its public through the escalated fears which shrouded the sale of its premier GCB. The fact that seen documents suggested the sales bid is more likely to be reinitiated through freshly renewed pressure by the IMF, also rendered concerns more tangible. As recently argued by an industry watcher, ?multinational banks are largely business enterprises which operations are driven by intense profit motives?. He feared that as a result, they are influenced by and bear specific corporate profiles. These, he argued, include selective choice and disadvantaged determination of strategic regional locations to which they are sited. This, render it significant to observe inferences that even though there is the attraction for multinationals into developing economies, this drive is limited to conditions that the global systems are interested only in markets of multinational enterprises (MNE) presence which can offer them a comfortable clientele base.

The implication of these selective market motives in global banking strategy, it can be argued, translated in the restrictive and proportionate distribution of their presence in Eastern European economies. For example in the region, Hungary is the only country with a comparatively significant investment of a 25% strand. It is followed by Poland and the Czech Republic which respectively attracted a mere 11% and 2 % in foreign bank participation. This scenario thus re-emphasis the varied interpretation by academics and governments of global banking, their rationales in the domestic market of developing countries and the corresponding impact they create. A study of efficiency and competition effect (Claessens, Demerguc-Kunk and Huizinga (2001) showed for example that quite opposite to the above good attributes of global banking for least developing countries (LDCs), foreign banking in Indonesia created economic strains in that country. Empirically, a comparative analysis between Indonesian foreign banks and local banks provided a yawning gap in financial market competition resulting in reduced profitability and non-interest income.

The Ghanaian Experience

It is also noted that foreign operations in developing countries do result in the reduction of interest margins to domestic intermediaries. It means that by squeezing local banks into this position as the latter is compelled to do so through the strategies and struggles to compete, the local intermediadairy ends up being pushed out of market. The result may not be far fetched since domestic employment in the sector stands to suffer. In Ghana for example, the aftermath of foreign bank participation in its domestic operation resulted in the retrenchment (Business News, 1999) or the sacking of several of the sectors labour force in the mid1990's. This was due to the preconditions of the foreign financial interests' willingness to work only with a relative and selectively least number of people among other reasons.

The event also resulted in the stoppage of much needed flexible loan facilities to domestic small and medium scale (SMEs) industries as loan portfolio has been diverted to the interest of multinationals operating in Ghana. There has also been a focused of global banks? preference for corporate banking than to individual retail customers in that country. Significantly, Ghana's economy is largely engineered by and dependent more on small and medium scale enterprises (SME?s). The sector, also constitute the country?s main commercial and industrial segment and employs over 65% of the labour force. The intervention of foreign banking therefore, in the country's domestic economy might not therefore be yielding required results, it is often observed. Arguments arising out of a study recently conducted by a research group with contribution from the writer, for example, concluded that in Ghana, ?this aspect of financial market segmentation and domination facilitated a substantial relative reduction in corresponding aggregate tax contribution, productivity, savings and consumption?. The study argued ?the trend is a focused economic engineering syndrome and catalyst for unemployment and a stifled developmental growth process. It emphasized that as an impact, the country's economy has continue to suffer major difficulties, including the collapse of majority of its local industries, and inaccessible investment funds. What this means is that by suspending these vital local business chains from effective economic functioning as in the case of Ghana, through credit denials, the entire domestic business sector, which are previously dependent on credit, would suffer detrimental consequences. The argument and or evident as to whether the above negative consequences, are generally representative and empirically ensue in all developing countries which have extensive foreign bank operation was however, not proven by the study. This difficulty may also account for the unending debate and argument for global banking including those of Mullineux and Murinde, (2001) and its impact on the economic growth of least developed countries. Their study sufficiently argued as in Berger etal, (2002), that it has become an accepted tradition that, generally, foreign banks, by their peculiar orientation, do deny local businesses in poor countries of funds such as in Ghana.

Developing Countries and Internal Weaknesses

Weaknesses in regulatory and supervisory environment, might have also partially accounted for the foreign banks? lack of effective contribution to host emerging markets, especially those in Sub-Saharan Africa. Financial systems management and disclosure standards are usually known to be inferior in African economies compared with the levels of this in the developed world, argued Peek and Rosengren etal (2000). The effect is that with this traditionally low standard of supervisory mechanism, the domestic regulator (governments) becomes even weaker in regulating foreign operators who enter the system. Apart from this, it is observed that since foreign banks are susceptible or prone to regulatory influences from their home countries, the difference in regulation, adherence and subtle non-compliance to this may have adverse effects on host nations. Logically this inability to exercise control can be negative, as government regulators do not strategise for effective power and adequate facility to compel compliance. A research document recently seen listed the extent of domestic economic bleeding poor country?s economy are exposed to through instances of these variables. As the document blamed this on the incompetent and misplaced priorities of African politicians, it marveled at the degree of docility and negative complicity of the continent?s intellectuals. It agued ?this collective inaction from a cream of its ?leadership citizens? exposed these poor countries to the vulnerability of foreign manipulation?. Dangerous implications, such as illegal money laundering, hard currency transfer, the disregard for domestic policies and insensitivity to domestic economic shocks among others, are therefore common place and impacts negatively on these emerging economies, the document argued.

Analysts also noted the tendency of foreign operations impacting negatively on the economic growth of developing countries. The commitment and strength of legal regimes and obligation under, which international banks operate and the extent to which this applies to domestic depositors in developing countries also came under scrutiny. The import of this view can be likened to the bitter economic shock, which was empirically experienced in Ghana when a multinational bank - Bank for Credit and Commerce International (BCCI), became insolvent. As its activities were suspended, most of the bank?s customers? deposits became irrecoverable. It means that as a subsidiary operating in Ghana, both the bank and the domestic regulating system did not provide the neccessary legal opportunities where credit can be recovered in case of bankruptcy or instant closures. In contrast, to the bank's failure to re-imburse customers in Ghana, subsidiaries in the developed world duly refunded depositors and discharged other commercial and legal obligations to their creditors. The issue here is that the parent holdings of global banks which subsidiaries operate in developing countries normally present themselves as not liable under such circumstances where internal economies are themselves defective of required regulatory machineries. This development even make it blurred the distinction between subsidiaries in local economies and parent firms in the advanced states. The scenario, arguably though, presents clear cases of bad faith and the incidents of the global banks' discriminate and limited economic agenda for developing economies against the latter?s inherent internal weaknesses.

?With enormous resource base, human and material, global banks are usually better equipped for effective competition?, international financial analysts argued. This leads to unfair distribution of domestic market shares and a threat to local banking operations - it is emphasized. By implication, as local financial systems suffer, it can, as well negatively impact on the availability of credit to small and medium enterprises especially middle and low income consumers. The corresponding effect of this is the fact that when economies experience financial instabilities and declining credit, governments turn to lose the means to protect domestic markets.

Experiences of the Asian Tigers

There are other essential linkages that can trigger local economic difficulties with the involvement of multinational banking in domestic operations. Prior to financial liberalisation, banking was more of a domesticated business. As global as it is, multinational bankers now work together with and influence local policymakers. It is argued that international barriers and regulations to private banking have become ineffective. Although multilateral banking, had increased loan avenues to governments and businesses and had improved the quality of domestic banking, its ventures due to their short-term nature. But as soon as some international lenders began withdrawing their funds, others quickly followed the lead. The result was an unprecedented financial meltdown in the form of a contagion which spread throughout Asia. This financial bust caused by the multinational operatives affected those economies as money impact has been negative. In Asia for example, foreign bank loans to Korean banks totaled $89 billions in 1997 out which $78 billion had a maturity of less than one year. For reasons of quick turn-over, Koreans businesses channeled these loans into speculative ventures rather than it being invested in tangible projects. The risk, it is argued, is that global banks have no allegiance to host emerging economies. Their presence might thus not be designed for the latter?s ultimate good and can be detrimental to the financial stability of these countries through the disruption of indigenous credit markets.

Collective Approach

From the foregoing, it can be argued that issues of multinational banking and the impact of this on the economic growth of developing countries may continue to be debated. In Ghana, seen discussion documents on the foreign takeover of Ghana Commercial Bank pointed at a reintroduction by the government through a propelled IMF process. The merit or not of this must in fact engage the honest attention of politicians. Professionals, academics and the business community for example should not relinquish this vital economic discussion process to Trade Unions and financial industry workers only. This is pertinent as the more the angles of policy debates on the subject, the more it would present equally educative and strategic economic fronts. For example, it cannot be gainsaid denying the fact that global banks brings into the developing economies, the benefits of banking efficiency, increased competition, financial stability and wider portfolio diversification. What is important here must be viewed from the background of developing countries and resource limitations towards sound economic management and increased growth. By the intervention of foreign bank entry, a stable source of supposedly limited facilities, such as credit need be provided. The assumption presuppose that this will enable banking and financial intermediation in poor countries such as Ghana, to offer expected robust economic activity especially as the subsidiaries of these big international banks, can rely on parent firms for capital funding as and when needed in host economies.

On the other hand, it is pertinent to note the extent of ills the presence of non-regulated global banking systems can inflict on host countries in term of their inherent undue competition, which in turn goes to cripple domestic banks. Further to this is the tendency to deny the local financial arena of vital market share, resulting in reduced interest margin, low commercial activity and their discriminate concentration on selective customer base - a tendency, which denies local enterprises of equal opportunities for credit. The risk in global banking as observed from the analysis, also pointed to the latter?s level of sophistication, complex, powerful regulatory and supervisory mechanisms falling outside the control and management of host countries and the relative economic dangers of this to their economic development. With these in-balances, it may be necessary for the international community, especially major players of the global financial environment, notably the IMF, World Bank and emerging nations alike to design more appropriate human centered economic intermediation system than what prevails now for poor countries. Basel II, presently, mercilessly needs workable input in the midst of fierce disagreement even from the United States of America and yet is in the offing. The African region can also raise its voice by emulating this or the collective technical and strategic approach of the Asian region and form a coalition of experts within its financial industry for a collective presentation of its peculiar regional formula, especially at foreign entry regulatory level.