Banking crisis

Banking crisis
International banking has increased substantially over the past few decades as it fosters the broader objective of attaining financial globalization and integration. Following the occurrence of the global financial crisis, there have been concerns about the impact of international banks on financial stability in the host countries (Eun, & Resnick, 2014). International banking operations in less-developed countries have had both negative and positive effects regarding the financial activities in these countries.
The occurrence of the financial crisis can be attributed to the activities of most of the internationally active banks since their trading positions facilitated the spread of the apparent financial distress across borders (Eun, & Resnick, 2014). For instance, some local banks were faced with significant pressure due to the lack of international exposure thereby negatively affecting their access to funding. Further, the results of the crisis affected the real economy of the less-developed countries as the financial systems came under stress thereby severely affecting interbank flows (Eun, & Resnick, 2014). Conversely, international banking has positive impacts on the economies of less developed countries as it can lead to the improvement of the financial infrastructure in developing countries (Schmukler, 2004). Since international banks have better access to funds, they are less affected in case of negative shocks in the hosting economy (Schmukler, 2004).

On the other hand, the operations of international banks pose some significant risks to the less-developed countries that may not be of major concern in developed countries. One of the major concerns is the problem of foreign domination. If the entry of foreign banks is not well regulated, then they pose the threat of dominating the domestic market thereby driving out some of the local banks that are less resourceful (Bhattacharya, 1994). Equally, the international banks may engage in cream-skimming behavior by targeting the upper end of the market making them obtain the largest share of local businesses operations compared to the domestic banks. It may lead to a shrink in the financial institutions of the host country due to increased competition for such a market (Schmukler, 2004).
In essence, international banking operations in less developed countries continue to have various impacts on the banking and financial sectors. Even though some of the effects are negative, the undertaking still offers better avenues for growth in less-developed countries.

References
Bhattacharya, J. (1994). The role of foreign banks in developing countries: A survey of the evidence. Ames, Iowa.
Eun, C.S., & Resnick, B.G. (2014). International financial management. New York, NY: McGraw-Hill ISBN-13: 9780077861605
Schmukler, S. L. (2004). Benefits and risks of financial globalization: Challenges for developing countries. Globalization, Growth, and Poverty, World Bank Policy Research Report. Retrieved from http://siteresources.worldbank.org/DEC/Resources/BenefitsandRisksofFinancialGlobalizationSchmukler.pdf.