The Competitive Impact of Foreign Commercial Banks in the United States

Abstract

Foreign commercial banks have grown rapidly in the United States in the 1980s and have had a significant competitive impact. The growing role of foreign banks in domestic markets has stimulated claims of unfair competition Banking is experiencing the same apprehension that has arisen from foreign entry into other industries. This article reviews the history and status of foreign banks in the United States. Reasons for the growth of foreign banks are closely related to their competitive impact; therefore, the paper summarizes studies that have analyzed the motivation for growth of foreign banks in the United States. Because foreign banks can employ various organizational forms, have entered different geographic areas unevenly, have originated from different countries at different rates, and have faced a changing legal and economic environment, an extensive discussion of the institutional framework within which the foreign banks operate is provided. Through the use of descriptive material, the review of past empirical studies and the development of an original empirical analysis, this article will attempt to assess the competitive impact to date and the likely future role of foreign banks in the American markets.