Modelling International Banking Flows: an Analytical Framework

Abstract

A major feature of the international monetary system of the 1970s was the increasing role of international banking generally and in particular the shift in the balance of roles of the official and private sectors. In terms of the provision of liquidity, the financing of the transfer of real resources and balance-of-payments financing, the private international banking sector (measured in terms of on-shore and off-shore external lending of private banks) substantially increased its role both absolutely and relatively to the traditional official sector (governments, central banks and official multinational development and financing organisations). This development was manifest in terms of the substantial increase in the volume of external assets of banks in major financial centres (Tables 3.5–3.8), the rise in the proportion of external assets and liabilities in banks total balance sheet positions, the relative shift from trade financing to more direct balance of payments financing, and the substantial rise in the number of banks participating in international lending business. The World Bank estimates that in 1978 the number of banks participating in the syndicated Euro-credit market was ten times that in 1972. Earnings from international business became increasingly significant over the decade. The range of nationality of banks participating on a significant scale in international lending was also extended.