The Economics of Banking
Chapter One
TRENDS IN DOMESTIC AND
INTERNATIONAL BANKING
MINI-CONTENTS
1.1 Introduction 1
1.2 Deregulation 3
1.3 Financial innovation 4
1.4 Globalization 7
1.5 Profitability 8
1.6 Conclusion 16
1.7 Summary 16
1.1 INTRODUCTION
The main thrust of this chapter is to introduce the major changes that have taken
place in the banking sector and to set the context for later discussion. Aggregate
tables and statistics are employed to highlight the nature of the changes. It
should also be noted that many of these changes are examined in more detail later
on in the book. It is also necessary at this stage to explain the nature of various
ratios, which we will use throughout this text. The relevant details are shown in
Box 1.1.
Banking is not what it used to be. In an important study, Boyd and Gertler
(1994) pose the question, 'Are banks dead? Or are the reports grossly exaggerated?'
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