World economy and international economic relations

International banking business and bank strategy: global trends and benchmarks for post-Soviet states

Economic Annals-XXI

Economic Annals-ХХI: Volume 185, Issue 9-10, Pages: 27-38

Citation information:
Murshudli, F., Zapotichna, R., & Dilbazi, E. (2020). International banking business and bank strategy: global trends and benchmarks for post-Soviet states. Economic Annals-XXI, 185(9-10), 27-38. doi: https://doi.org/10.21003/ea.V185-03

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Fakhri Murshudli
PhD (Economics),
Doctoral Student,
Azerbaijan State University of Economics (UNEC)
6 Istiqlaliyyat Str., Baku, AZ1001, Azerbaijan
fahri_murshudli@yahoo.com
ORCID ID: https://orcid.org/0000-0002-3036-0731

Roksolana Zapotichna
PhD (Economics),
Lecturer,
Lviv State University of Internal Affairs
26 Horodotska Str., Lviv, 79000, Ukraine
roksolana.zapotichna@gmail.com
ORCID ID: https://orcid.org/0000-0002-5588-171X

Erkin Dilbazi
PhD Student (Economics),
Azerbaijan State University of Economics (UNEC)
6 Istiqlaliyyat Str., Baku, AZ1001, Azerbaijan
erkin.dilbazi@gmail.com
ORCID ID: https://orcid.org/0000-0002-9376-205X

International banking business and bank strategy: global trends and benchmarks for post-Soviet states

Abstract. The authors analyze the state of international banking business before and after the global economic crisis of 2007-2009, and make predictions on potential future effects of the ongoing COVID-19 pandemic on transformation of international banking and bank strategy. The analysis focuses on trends and changes in the two most important forms of trade in banking services, namely, cross-border banking flows, which include direct cross-border banking flows and local banking flows of international banks’ subsidiaries abroad, and foreign bank presence. It has been concluded that direct cross-border banking flows are more volatile than local banking flows of foreign banks during economic and social upheavals. The period under study has witnessed large increase in foreign bank presence, both in terms of number and local market share. The study determines changes of leading international banks and their home countries, highlighting the weakening position of banks from advanced countries and increase in the role of banks from emerging markets and developing countries.

The authors review international expansion strategies of major banks from the post-Soviet states, that are influenced both by the opportunities and goals of banks going abroad, and by the institutional features of their banking systems; countries which these banks are targeting are predominantly comparable to the post-Soviet states in terms of economic development, and are chosen by criteria of their attractiveness, such as high level of trade and political relations with the bank’s home country, the presence of diaspora, the degree of saturation and growth dynamics of the banking market in the host country. The reasons behind the banks’ geographical expansion decision include, among many others, the dramatic growth of their economies, stimulated by the involvement in globalization processes, and liberal banking reforms. Obstacles of economic and non-economic nature that are hindering this expansion, encompass high level of competition in external banking markets, expensive financial resources of domestic banks, low level of expansion of the post-Soviet states-based enterprises to the non-post-Soviet states, discriminatory qualification requirements for personnel and composition of management bodies, problems related to banking licensing procedures and requirements, aspects of culture and communication; their transformation from local banks, operating in the local market, to banks with a clear manifestation of the tendency of their international expansion amidst changing global environment and uncertainty.

Keywords: Bank Strategy; International Banking Business (IBB); Foreign Banks; Changing Global Environment; Global Economic Crisis; The post-Soviet States

JEL Classification: F23; G21; P21

Acknowledgement and Funding: The authors received no direct funding for this research.

Contribution: The authors contributed equally to this work.

DOI: https://doi.org/10.21003/ea.V185-03

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Received 30.08.2020
Received in revised form 20.10.2020
Accepted 22.10.2020
Available online 21.11.2020
Updated version of the paper as of 12.12.2020

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