Globalization of Financial Institutions

This study aims at assessing the transformation undergone within the framework of globalization in terms of the tasks assumed by the state in the economy. This study, which provides a theoretical framework, discusses the roles the global economy assigns to the state and how the state changes the governing and financial tools. In this study, the transformation process concerning the role of the state in economic life is taken up as of the 1980s and the aftermath, which is named as the neoliberal globalization period. Initially, conceptual information is introduced, with the importance of the nation and welfare state put forth and the approaches recognized in literature are assessed. Then, the roles assigned to the state are explained in the transformation of the state with policies suggested for the solution of problems arising in 1970s and the problems attributed to the state caused by the failures of international entities undergone in the 2000s. Starting with the overall judgment that globalization wears the welfare and nation state out, it is possible to set forth that the state’s political, governmental and economic role and effectiveness vary at a certain level and especially the nation state is one of the most important actors of globalization and also one of the modest contributions of the study.

The 2008 global financial crises had a deep impact all over the world. The experience of the global financial crises dates back to last century. Firstly, national economies turned to global economies due to rapid development in technology; increase in trade of commodities and capital flows after the industrial revolution. However, failure of the gold standard system was the main reason for the first global crisis in the late eighteenth and early nineteenth century. Initially, the crisis emerged in the financial markets and spread to the commodity markets, and later to international trade. The Great Depression of 1929 would be described by sharp decreases in production, high unemployment, inflation and interest rates. Similarly, the 2008 global crisis emerged on financial markets. The monetary policies followed by developing countries influenced all the markets in not only developed but also developing countries. This paper aims to discuss the impact of globalization and monetary policies on different markets and different parts of the economies. In the first part of the paper, the main instruments of monetary policies will be explained. The question of how global factors will become an important part of domestic nations will be one of the main issues in this part. The role of central banks and their policies on developed countries is another issue. In the second part, the main focus will be on foreign exchange rate volatility. Here, especially 2008 financial crisis will be analyzed in perspective of Euro area countries. The main arguments for recovery of financial crisis another issue discussed.

The global economy is not yet recovered fully from financial crisis of December 2007 and that a second recession known as dip-recession has affected the world economy. The United Nations (UN) Report in 2011 warned that the world was on the brink of another recession. The recession is already started in the US and the Europe. The European Union is on the verge of disintegration as the week economies may leave it. It is believed by many economists that the second crisis or recession would be worse than the first one. Here too the US and Europe are the major players while the developing economies are feeling the heat. This is the best example of con/demerit of globalization. The present paper examines the major factors responsible for the emerging trends and its impact on US economy in particular and global economy in general. Warren Buffett’s recommendation must be followed by the US authorities to overcome a deficit problem which is one of the core issues and sine-quo-non for existing crisis. The EU should also take fiscal and monetary measures to solve the debt crisis. The loans given to Italy and Spain amounting to $1.3 trillion when matured in 2014 could create a global economic ‘tsunami’.

This study examined globalization and Sub-Saharan Africa (SSA) with emphasis on its impact on growth and poverty reduction in relation to other regions. The existing literatures on the implication of globalization on economic growth and poverty were reviewed. The study reveals that SSA has been marginalized or has not fared well in spite of the high integration of its member countries. Indeed, SSA has relatively remained poor and with high incidence of poverty. However, in order to maximize the benefits of globalization, Sub-Saharan Africa needs to adopt among others; development of strong production base that is predicated on value-added products, export structures diversification, development of manufactured export capacity and the political-will to implement these policies among others.

The 2008–2009 financial crises which began in the USA was one of the greatest economic crises in history. Even though the crisis started in 2007 in advanced economies, its effects still continue and no one can foresee the end of the crisis. In this chapter, it is aimed to illustrate the linkage between the globalization process of the financial system and the roots of the global economic crisis. This chapter evaluates the roots of the global economic crisis. Liquidity redundancy, credit defaults, securitization, the lack of transparency, the shortcomings of rating entities and supervisory entities are some pillars of the global economic recession.

The Ottoman economic mind was closely related to the basic concepts of state and society in the Middle East in which the ultimate goal of a state was consolidation and extension of the ruler’s power. By developing commercial centers and routes, the state performed basic economic functions in the empire. In 1923, Turkey underwent a great transformation in terms of religion, social, and cultural bases of Turkish society as well as its political and economic structure with its announcement as a republic with Ataturk being its first president over 14 years. This chapter discusses the changing structure of the economy, financial system and banking sector since the Ottoman Empire up until today’s Modern Turkey. It provides the reader with an overview of political instability, financial crises experienced in the country and what has changed in the banking sector over the past 700 years.

This study investigates the relationship between foreign investment and bank productivity in Turkey over the 1992–2010 period by examining and decomposing the DEA Malmquist index scores of 17 commercial banks. Four questions are at the center of this study: What are the productivity scores of foreign invested private commercial banks? How was it affected by increased FDI? Did foreign investors target more productive and profitable banks to invest in? What are the most important components of productivity growth: technical progress, efficiency gains, better management or the realization of scale economies? Empirical findings support the hypothesis that productivity scores of foreign invested banks are higher than domestic banks before the time of foreign investment. Overall, decomposed productivity figures indicate that the most significant factor on the total factor productivity change (TFPC) is the technological change (TC) and bank specific factors are important. Interestingly, no significant relationship found between FDI and the Malmquist components.

The main purpose of this study is to analyze the role of financial determinants on the bank profits in the Turkish Banking Sector. A comparative analysis has been conducted to predict the bank profits using Support Vector Regression (SVR) and Linear Regression (LR) models. The results illustrate that Net Interest Income After Specific Provisions/Total Operating Income, Non-Interest Income/Non-Interest Expense, Provision For Loan or Other Receivables Losses/Total Assets predictors have the most relative importance on SVR while Non-Interest Income/Non-Interest Expense, Provision For Loan or Other Receivables Losses/Total Assets predictors have it on LR. On the datasets containing these predictors, performances of SVR and LR models were compared based on Root Mean Square Error (RMSE) and Mean Absolute Error (MAE) metrics. The findings present that SVR predicts the level of bank profits better than classical LR model based on both metrics.

As the trade volume of Turkey has tripled in the last decade, one observes a complementary shift in the trade orientation of the country from its conventional markets like the European Union to Asian and African markets. Among the alterative markets, the members of the Organization of Islamic Cooperation (OIC) have become particularly important in the market diversification policy of Turkey. In this respect, computing the actualized trade potential can not only account for the dynamic change in trade orientation of the country but also presents a guideline for policy makers and firms. On the other hand, since recent research in literature stated that estimations of potential trade through a single estimator (monotype estimation) lead to overestimations (or underestimations) which misguide policy makers; thus, this paper employs an estimator selection process. For that purpose, this study uses a gravity model estimated by multiple alternative estimators to assure the econometric credibility. This paper aims at (1) choosing the most adequate estimator possible for the case through an estimator selection process, (2) computing the trade potential of Turkey in the OIC market, and (3) revealing to what extent the trade potential has been actualized up to now.

The European Union is an enormous power in world trade. The huge size of its market, its experience in negotiating international trade agreements, the creation of the Single Market and the creation of the single currency-Euro have turned the European Union into one of the most important trade blocs in the world. This section examines the historical development and evolution of the European Union as a trade bloc. Firstly, the concept of a trade bloc and regional economic integration are examined. In this study, the establishment of the Single Market and European Monetary Union has been evaluated. Finally the impacts of the Euro on the Single Market, the current and future strategies for the Single Market have been discussed.

Since the day of its inception at Motorola Inc., Six Sigma methodology has been widely used in process improvement by companies all over the world including financial institutions. Users of Six Sigma strive to achieve competitiveness through improving processes. In recent years, “Lean” principles have been merged with the Six Sigma approach in what is known widely as Lean Six Sigma. Six Sigma is not only applicable to manufacturing but also to the service sector. With growing competition in the financial services sector, Six Sigma principles can be used to cut costs, increase efficiency and thereby help companies to stay afloat in the global economy. This paper will try to outline how Lean Six Sigma principles can be used to continuously improve service operations with special emphasis on financial institutions such as banks, insurance companies, individual pension systems, brokerage firms and others. A demonstrative case is also provided on how the principles can be applied in the context of a pension company.

This chapter gives an overview of how financial innovation has been one of the most influential factors in shaping today’s financial system and the world economy. It starts with a brief review of the financial innovation literature and addresses the determinants of financial innovation. The next section examines the current debate regarding financial innovation and concludes with a discussion for the future of these new financial products and processes.

Tools facilitating the exchange of goods and services between economic units and information technology systems comprising of the institutional and organizational roof, operative processes and communication network are important for the effective functioning of the financial system and the economy. This chapter aims to analyse the role of information technologies and impact on financial institutions. As a conclusion, it has been revealed that the primary target of financial institutions is to ensure the most appropriate data flow, interdepartmental information exchange and coordination, swift and cheap access to information, following up on innovations and ensuring communications with services sectors. Moreover, in this research, it has been observed that the conflict levels among personnel, directors and branches have decreased. Also, the effect of information technologies on organizational performance is observed that it increases service efficiency, financial institutions’ competitive aspect, number of customers, profitability and organizational performance in general.

The objective of this paper is to analyze changes in securities market supervision and regulation by investigating the impacts of the 2008 global financial crisis (GFC) on the conceptual framework of securities market supervision (SMS). Post-GFC, the trend of SMS is characterized by a move away from the market-based approach and an increasing reliance on the risk-based approach. Further, the macro-prudential supervision approach relying on the involvement of the securities regulator has become common practice. First, this paper identifies the theoretical framework of the SMS prior to the GFC. Next, this paper observes some key developments of SMS post-GFC. Finally, this paper concludes that the philosophy of the SMS has experienced substantial evolution post-GFC. Neo-liberal ideologies and the efficient markets hypothesis (EMH) is no longer considered as the conventional wisdom of securities market regulators. Accordingly, a new conceptual framework of market supervision is recommended. The twin-peak model is identified as the preferred model due to a wider view of systemic risk mitigation.

It is proved that traditional guarantees such as mortgaging or accessory guarantor could not reduce the risk in international trade and might put the business life in danger. In order to overcome such obstacles and secure the international transactions, bank guarantees have been designed and widely used. As a form of non-cash credit bank, a letter of guarantee ensures that the bank undertakes to meet losses arising—at the request of one of the parties—if the other party does not fulfill its requirement, debt in accordance with the contract or fails to perform as it should be. In the international level there have been several attempts to unify the rules on bank guarantees. The “United Nations (UN) Convention on Independent Guarantees and Standby Letters of Credit” was adopted and entered into force in 2000. Moreover, The International Chamber of Commerce accepted “Uniform Rules regarding the Guarantees at Request (URGR) Publish no.758/2010” which can be applied in the international trade as well. Four views have been developed on the legal nature of bank guarantees by the doctrine and court cases: “bail”, “guarantee”, “sui generis contract” and “mixed quality”.

The purpose of this study is to explore the relationship between financial distress and health and financial behaviors among families in Ankara, controlling for socioeconomic characteristics, financial discussion with parents, negative financial events, and risk tolerance. Data was collected through a systematic sample in the neighborhood of Dr. Halil Ulgen Health Center (Mamak-Ankara, N = 600) in summer 2009. Bivariate results showed significant differences in financial distress levels by socioeconomic factors and financial behaviors. In addition, regression analysis showed that saving and self-reported health status was significantly related to financial distress when controlling for other factors.

Globalization and pervasiveness of Internet usage enabled investors to move their funds from market to market. This reality leads to a more diverse universe for investors and in order to better understand their varying rationales, it is essential to take factors influencing their decision making process into account. Behavioral finance explains some of these factors and this paper examines and discusses some of the most important factors and theories affecting investor behavior in the literature.

This study bridges the gap between theory and practice of risk management in banks incorporated in Saudi Arabia. The main objective of this study is to investigate the risk management process to assess the level of involvement of boards in risk management practices (RMPs). This study surveys representatives from banks to elicit their opinion regarding the characteristics of an efficient risk management process, the four aspects of risk management practices; understanding risk management (URM), risk identification (RI), risk assessment and analysis (RAA) and risk monitoring and control (RMC), as well as the role played by boards in risk management (RM). The results suggest that banks in Saudi Arabia have an efficient risk management process and an adequate understanding of risk management and a system for risk identification. Additionally, there is a high level of board’s involvement in assessing, analyzing, monitoring and controlling risk efficiently, where they are somewhat reasonably efficient in managing risk, hence, URM, RM and RMC are the most influencing factors in RMPs. This study may have practical implications for boards in banks incorporated in Saudi Arabia by explaining the adoption of certain risk management strategies, and helping them understand how risk management behavior can maximize operating performance. In addition, it would help regulators and policy makers to develop a coherent and acceptable set of risk management tools and techniques.

In the period of the 2008–2009 financial crisis, fluctuating conditions addressed the importance of leadership and developing competitive innovation strategies in the banking sector. From a behavioral approach to a scientific route, it has been accepted that the leadership and innovative solutions to issues in financial system are prior to examination. The most important matter for institutions in the financial system is to sustain a competitive advantage will be developed, continued in a wavy, turbulent, complex and most complex environment and how they can change themselves in this process. In this chapter, leadership and innovative strategies in banking are closely attached to the success and sustainability in a competitive environment.