604 CHAPTER 16. INTERNATIONAL FIXED-INCOME MARKETS
Table 16.1:Largest Banking CentersBranches & Cost/ Cross- Cross-
Banking # subsidrs of Return income border border
deposits of banks forgn banks on captl ratio lending borrowing
Dec-05 Mar-05 Mar-05 2006 2006 (%) Mar-07
(usdtr) (number) (number) (%) (%) Mar-07 (%)
JP 5.1 129 69 16.2 69.4 9 2
US 5.2 7,540 228 22.2 59.9 20 12
UK 4.6 347 264 19.6 50.2 10 23
DE 3.1 **2,344 125 4.7 61.5 9 7
FR 1.5 **318 *217 15.7 63.9 8 9
* end-2004; ** end-2005SourceInternational Financial Services London. International Financial Markets in theuk,
November 2007. http://www.ifsl.org.uk/research; based on Bank of England, KPMG, Banque de France,
The Banker, Bank for International Settlements, European Banking Federation, Bank of Japan,
FDIC, US Federal Reserve
similar market would have emerged sooner or later because there was a need for a
fast, lightly regulated field for big, professional players. London and other centers
provided just that.
Nowadays, however, the playing field has become much more even, and the
“euro”markets’ comparative advantage was eroding fast. Wholesale, simple deals
with prime borrowers can be signed everywhere. “Regulatory arbitrage”—that is,
borrowers and investors migrating away from the overly regulated markets—has
forced countries everywhere to dump rules, taxes and duties that did more harm
than good. In theus, Glass-Steagall and the ban on interstate banking have been
repealed. Currency controls are gone for most currencies, as are credit restraints
and, in many countries, reserve requirements. Tax authorities cooperate interna-
tionally, and governments exchange information on foreign deposits and/or foreign
investment income. Originally, this was just in cases where crime- and drugs-related
money laundering was suspected or, later, terrorist activities; but cooperation for
fiscal purposes is coming in too. Within theEU, information on non-residents’ in-
come is already being shared; a few countries still impose withholding taxes instead
but this will be phased out. Secret (“numbered”) bank accounts, for a long time
one of the attractions of, most notably, Swiss, Austrian, and Lichtenstein banks,
are essentially a thing of the past: bankers must know their customers’ identities.
Tellingly, countries with a dark reputation are now being blacklisted by theOECD;
when in the early 2000’s a new government in Mauritius proposed to set up a “high-
privacy” banking sector, the big countries were all over her and Mauritius hastily
withdrew the proposal.
As a result, there is not much difference anymore between domestic and interna-
tional banking, certainly not for wholesale deals inOECDcountries and the like. In
that sense, in a large part of the world markets nowadays are truly international,