The Internationalization of Financial Services in Asia

60 Pages Posted: 20 Apr 2016

See all articles by Stijn Claessens

Stijn Claessens

Bank for International Settlements (BIS)

Thomas Glaessner

World Bank

Date Written: May 26, 1998

Abstract

Asian countries should consider the benefits of opening their financial service sectors more quickly - at the same time that they are liberalizing capital accounts and deregulating domestic financial markets. The internationalization of financial services - eliminating discrimination between the treatment of foreign and domestic providers of financial services and removing barriers to the cross-border provision of financial services - is of global interest, especially in Asia.

Most of Asia limits the entry of foreign financial firms much more than otherwise comparable countries do. Empirical evidence for Asia and elsewhere suggests that this slows down institutional development and that, as a result, it costs more to provide financial services. Asian countries could benefit from accelerating the opening of the financial services sector, in conjunction with the further liberalization of capital accounts and domestic deregulation of financial markets.

Apart from other benefits, internationalization helps build more robust, efficient financial systems by introducing international practices and standards; by improving the quality, efficiency, and breadth of financial services; and by allowing more stable sources of funds. The ongoing WTO negotiation of financial services under GATS gives countries the opportunity to commit to opening their financial sectors. Safeguards can be built into the process, and the liberalization can be phased in gradually.

This paper - a product of the Economic Policy Division, Poverty Reduction and Economic Management Network - is part of a larger effort in the network to study financial reform in developing countries. The paper was written during the summer of 1997, before the East Asia financial crisis and before the conclusion of the WTO negotiations in December 1997.

Suggested Citation

Claessens, Stijn and Glaessner, Thomas, The Internationalization of Financial Services in Asia (May 26, 1998). World Bank Policy Research Working Paper No. 1911. Available at SSRN: https://ssrn.com/abstract=620515

Stijn Claessens (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Thomas Glaessner

World Bank

1818 H Street, NW
Washington, DC 20433
United States

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