Globalizing in Hard Times

In Globalizing in Hard Times, Leonardo Martinez-Diaz examines the sudden and substantial increase in cross-border ownership of commercial banks in countries where bank ownership had long been restricted by local rules. Many partiesthe World Bank and the IMF, the world's largest commercial banks, their home governments, and their negotiatorshad been pushing for a relaxation of ownership rules since the early 1980s and into the 1990s, when bank profitability levels in advanced industrial societies went flat. In their hunt for higher returns on assets, the major banks looked to expand business overseas, but through the mid-1990s their efforts to impose more liberal ownership regimes in nationalist countries proved largely unsuccessful. Martinez-Diaz illustrates the ongoing political resistance to liberalized ownership rules in Mexico, Indonesia, Brazil, and South Korea. He then demonstrates the importance of a series of eventsthe Mexican crisis and the Brazilian banking shock in 19941995 and the Asian crisis of 19971998 among themin finally knocking down barriers to foreign ownership of banks. After these upheavals, policymakers who were worried about their political survivaland who were sometimes pressed by the IMF and foreign governmentsreshaped the regulatory environment in key emerging markets. Self-proclaimed global banks eagerly grasped the opportunity to expand their operations worldwide, but after the initial shock, domestic politics reasserted themselves, often diluting the new, liberal rules.