Question

Critically discuss the costs and benefits of cross-border banking

Answer 1

Cross-border banking refers to a situation where the banks of a country are in continuous and consistent in doing transactions abroad. It is also called as cross-border financial linkages. There is both bright and dark side of this.

The bright side is that it leads to rapid economic growth with the help fast capital mobility internationally, give more funding opportunities and options, greater investment etc. These benefits have been witnessed by many countries across the globe.

The dark side is that any financial crisis happening in one part of the world could spread like a communicable disease in the entire financial system of the globe. Moreover, lack of regulations leads to fraudulent transactions as happened with an Indian public sector bank this year. The example of the former is the global financial crisis of 2008 which started from the US spread across the world. These are the potential costs.