ASSIGNMENT COVER SHEET
UNIVERSITY OF SUNDERLAND

BA (HONS) BANKING AND FINANCE

Student ID:
Student Name:

169154426/1
Mai Le Phuong

Module Code UGB322
Module Name/Title: International Banking
Centre / College: Banking Academy of Viet Nam
Due date: January 2018

Hand in date: 12 January 2018

Assignment Title: Individual assignment

Students Signature: (you must sign this declaring that it is all your own work and all sources of
information have been referenced)


Table of Contents
PART A: REASONS BANKS MOVE ABROAD AND THE ROLE OF INTERNATIONAL BANKS IN VIETNAM. .... 4
Introduction:................................................................................................................................................. 4
II. BODY ...................................................................................................................................................... 5
1.

Reasons for banks going abroad .......................................................................................................... 5

2.

Presence of international banks in Vietnam ....................................................................................... 8

III. CONCLUSION ................................................................................................................................... 13
PART B. INCOME OPPORTUNITIES AVAILABLE TO INTERNATIONAL BANKS AND THE POTENTIAL
IMPACT OF THE REGULATORY REFORMS SINCE THE FINANCIAL CRISIS ON SUCH INCOME ................... 14
I.

INTRODUCTION: ................................................................................................................................. 15

II.

BODY ................................................................................................................................................... 16
1.

Income opportunities available to international banks ............................................................... 16

2.

Potential impact of regulatory reforms since the financial crisis on such income. ..................... 17

III.

CONCLUSION: ................................................................................................................................. 22

References .................................................................................................................................................. 23



Module Title: INTERNATIONAL BANKING
Module Code: UGB 322
BA (Hons) in Banking and Finance

Submission date: 12 January 2018

Prepared by: Mai Le Phuong

Student ID: 169154426/1


PART A: REASONS BANKS MOVE ABROAD AND THE ROLE OF INTERNATIONAL
BANKS IN VIETNAM.

Introduction:
This paper investigates the drivers of bank foreign expansion. There are many reasons
that motivate banks to going abroad. Understanding these factors which have led the
entry of foreign banks is crucial to the host countries. Therefore, the role of these foreign
owned banks can be evaluated. In Vietnam, foreign banks have acted at both positive role
and negative role.


II. BODY
1. Reasons for banks going abroad
Over the past decades, there has been a significantly increase of international financial
integration. Larger financial integration therefore has been closely joined with the
internationalization of banking (Brewer, 2000). The positions of banks gross cross-border have
expanded sharply. Bank ownership are diversified more, foreign subsidiaries as well as branches
are becoming more popular (David, 2014)
Following the trend of globalization, the opening of representative offices and branches abroad

of the commercial banks is indispensable. Approaching to new markets and financial
deregulation has helped banks to accelerate the growth of operations (Goldstein, 1999). The
candidates for today global banks of the new millennium namely Merrill Lynch, J.P. Morgan,
Goldman Sachs. Citibank for instance, have been operating offices in more than 90 countries,
HSBC has about 4000 offices in 70 countries (Citibank, n.d.).
There are many markets for foreign banks to choose and to provide a range of financial services
which question about the reasons impact the decision for global expansion of banks. In this
literature, several factors are determined.


Factor price differentials and trade barriers:

Factor price differentials and trade barriers are two core theoretical and empirical motives behind
a bank’s decision to operate abroad (Asiedu, 2002). Factor price differential refers vertical
Foreign Direct Investment (FDI) implies that the foreign expansion occurs therefore firms can
benefits from international price differences. (Faeth, 2009) study worldwide location choice of
US bank in 22 countries conclude that GDP and FDI are main determinants for the expansion of
US banks. Likewise, (Herrero and Simon, 2003) proved that the reasons of bank’s expansion in
London is the size of the banking sector in the foreign country, bilateral trade with UK, the FDI
make a positive impact on the foreign country’s bank expansion in London.
According to (Goldberg, L. G. and D. Johnson, 1990), the headquarter services require mainly
physical as well as human capital inputs. Nevertheless, the production is substantial manual
labor intensive. If factor prices is differential among countries, then firms turn into
multinational by setting up production in lower manual labor cost and lower skilled labor costs
for headquarters (David, 2014). The home currency costs of going overseas usually to be more
appealing than the costs of similar operation in the home market (Faeth, 2009).


In Malaysia for instant, UK’s banks like Standard Charted established subsidiaries not only for
the potential market but also because of their lower labor cost (Brewer, 2000). The bank has

employed about 7,000 employees for Malaysia’s operation with about 40 branches (Faeth, 2009)
Regulatory for many areas of banking are also play as substantial trade barriers (Gray, 2005).
If banks want to sell its products in a market, it has to establish physical presence in that market.
Many jurisdictions demand a bank to have a physical establishment before entering market for
retail banking service. The regulations in both domestic and foreign markets acted as a crucial
role in the development of multinational banking (Jacobsen, 2008). Because without physical
presence, banks may find it difficult to control their foreign expansion activities like marketing
rules, differences in tax treatments, legislation of protecting consumer and so on (David, 2014).
Even though in EU where so much efforts have been done to build a single market, retail
services of finance are only provided by banks that placed in the respective countries (Jacobsen,
2008).
Location advantages is another factor which happens from differences between countries
resources, national regulatory frameworks or socio-economic element (Brewer, 2000). The
advantageous condition gained from a new location in the host country make it profitable for
foreign banks (Asiedu, 2002).

Income diversification
It is easy to see that the motivation for going overseas of banks is to hit the mark of management
to diversify banks business activity. By approaching into different markets, bank can expose
their operations to the risk and return profile of exact business areas. (Herrero and Simon, 2003) ,
Banks in some countries that have a great share of total credit which means they are more
exposed to credit risk. Hence these banks are in need to going oversea to diversifying portfolios
as well as smoothing the non-synchronous fluctuation between loans and deposits (Goldstein,
1999).
For example, if a United States bank believes the retail banking in Indonesia is more promising
and more attractive than retail banking in US then it is worth to consider going abroad. Therefore
US bank will be less exposed to its home market and can diversify its income.
Otherwise, if banks only operate domestic, their customer base will only limit within country
(Lipsey, 2002). But if banks also operate overseas, they can increase and attract customers from



other countries as well. (Jacobsen, 2008) pointed out that banks want to build subsidiaries in
countries with profit are expected to be higher which is an obvious determinant explain why
banks in developed countries are tend to open subsidiaries in developing countries. Banks that
obtain a large and geographically diversification customer base and banking networks will be
capable of cutting transaction costs by gathering customers with offsetting needs. (Asiedu,
2002). Moreover, spreading different product across different environments of economic can
help banks to decrease expected costs of financial distress/bankruptcy (Boot and Schmeits,
2000). (Williams, 2005) reaches a conclusion that international banking with diversification of
assets help banks to avoid systematic risks and stabilize the returns from their asset and improve
level of efficiency.

Arbitrage and the cost of capital
Arbitrage is another motive behind bank’s decision to invest overseas (Herrero and Simon,
2003)which basically means that bank raise finance in markets with strong currency that can be
borrowed quite cheap. After that, bank can invest that reward in weak currencies markets and
gain profit from the difference in currency (Goldstein, 1999). Cost of capital refers to the
situation that banks will earn credit when raising finance. When debt or equity instruments in a
strong currency are issued by bank, bank can also do that at a rate of interest which is beneficial
for them (Goldstein, 1999). For example, if the Euro is stronger than the dollar, funds can be
raised through banks have subsidiary in Europe so that banks can acquire cheaper than their US
firm which will benefit banks in someway and contribute to their expansion reason (David,
2014).

Ownership advantage
Ownership advantages are important because they allow banks to overcome the advantages
enjoyed by indigenous banks. When operating abroad, banks must own some of competitive
advantages to compete with domestic banks equally (Williams, 2005). These advantages are
valuable, easy to transfer and diffused smoothly within the bank such as technological expertise,
superior marketing technique, and managerial expertise and so on. (Goldberg, L. G. and D.

Johnson, 1990)observe that the impact of foreign ownership is beneficial to banks’ operations.


(Thomsen, 2002) reach a similar conclusion that the scope of the foreign ownership level impact
positive on the return and risk of bank which explain why banks want to go abroad.

Follow customer
Many studies show that the motive “follow customer” help banks to serve their domestic
customers that have been internationalized (Brewer, 2000)
The need for expanding abroad of bank to follow its customer oversea was also implied in the
research of (Nigh et al, 1986). (Brewer, 2000)claimed that there is a positive relationship
between the foreign activity of US banks and the extent of the US FDIs. (Goldberg, L. G. and D.
Johnson, 1990) concluded form their studies that the foreign banks involved the US market to
fulfill the international trade and direct investment demands of their home-country clients.
(Thomsen, 2002) also provide evidence that the higher the number of the clients from a home
country in the foreign country, the higher the appearance of banking from the same home
country in the foreign country.
2. Presence of international banks in Vietnam

Keeping up with the trend of globalization of the banking industry, as a developing
country, Vietnam has opened its market to foreign banks. As a result, international banks seized
the chances for their expansion (GBS, 2010). The country therefore has allowed banks from
abroad to access the market since 1990s. Law on Foreign Direct Investment and Law on Credit
Institution are issued in 1987 and 1997 respectively (SBV, n.d.). These deregulations has create
favorable condition for foreign banks to enter the market and develop the basic infrastructure
and international standards (SBV, 2016).


Number of Vietnam Commmerical banks
60

50

52

50

48
40
30

34

31

26

20
10

5
5

4

4

5

5


2

8

0
1999

2012

State commercial banks

Joint-stock commercial bank

Joint-venture bank

Wholly foreign bank

2017
Foreign Branch Bank

Table: Number of Vietnam Commercial Bank from 1999 to 2017 (SBV, 2016)
Over the last two decades, the influence of foreign banks ‘entrance in Vietnam banking systems
has been growing that has performed state management over Vietnam banking activities,
monetary and foreign exchange (SBV, 2016). By the end of August 2017, joint-venture and
foreign banks had the highest capital expansion of 7.7 percent. Meanwhile, joint-stock
commercial banks and State-owned banks are lower, at 2.9 per cent and 0.8 per cent respectively
(SBV, 2016).
Over years, Vietnam has managed to attract a great inflow of foreign banks. These developments
are regarded as vital source of economic growth for the country (Nguyen, 2007)
Roles of international banks in Vietnam

The presence of foreign therefore has benefited Vietnam financial system in vary ways.
2.1.

Positive impact
First, they bring state of the art technology and training for domestic bankers
(Mathieson et al, 2001)

When access to Vietnam, banks from abroad have brought many advantages to the financial
system and over all economy. As a host country, Vietnam has benefited the technology and
financial product innovations associated with foreign banks. Foreign banks introduce new


product, new techniques for manage risk and modern corporate governance culture. This
expansion also assist in stimulating transparent intermediary operation, legislative framework,
financial monitoring and decrease corruption (Domanski, 2005)
By enabling a better application of advanced management skills and more choice of products,
foreign bank has fostered the development of financial markets (Detragiache, 2004). Banking
sector thereby can benefit from the spill over effects and boost up economic efficiency. Domestic
banks when are influenced by the spillover effects saw an increase in profit and in costs.
This is because overseas banks are considered more productive and less risky than domestic
banks, create a big gap of banking and technique. Therefore it force domestic banks to upgrade
in technology, services and monitoring activities (Detragiache, 2004). Domestic banks as a
consequence can learn from foreign banks advanced techniques and good management skills and
benefited the rich capital (Goldberg et al, 2001). Moreover, as a host country, that financial
banking market can gain another positive impact which is to intensify market competition
(Detragiache, 2004). According to (Nguyen, 2007), banks of Malaysia, Indonesia like Hong
Leong, IVB... have the corresponding labor productivity 2-3 times higher than the productivity
of Vietnamese banks, which contribute to reduce costs, improve business performance.
Moreover, in order to compete other banks, banks all over Vietnam continuously launch new
products with advanced technology such as M-POS, Mobile Banking, chip card technology, ewallet (Le, 2017). Vietnam banks catch up with that Internet banking trend and make their own

innovation to serve customers. Viettin bank provides customers with Viettinpay, BIDV provides
customers with Business Online payment service, Vietcombank updated new Mobile Banking
service for customers (Phuong, 2017). In 2016 when Standard Charted released the Good Life
mobile application, based on a global positioning system (GPS), enables customers to search for
special deals for debit and credit cards at locations where they come, TP Bank then launched
Live Bank allowing customers to make transactions such as opening accounts, opening savings
accounts, cash deposits, ATMs, and authenticating transactions with fingerprint sensors (Phuong,
2017).
It is easier for foreign banks to access capital market abroad and liquid funds since
they know how to deal with complex financial instruments and techniques (Lipsey, 2002).
Moreover, their funding and lending patterns are more stable than domestic banks. During


periods of stress in the host country, foreign banks may not be affected much because they own a
diversification of geographic credit portfolio (Nigh et al, 1986).
The presence of overseas banks also help to stabilize the banking systems especially in
emerging economy. A study of Vogel and Winkler (2011) which cover the data in 84 emerging
market countries had found that international banks have the role of balancing the cross-border
component of financial worldwide growth. In such emerging markets, when foreign banks have a
high share of assets, the bank flow will be likely less decline (Rosengren, 1997)
(Goldberg, L. G. and D. Johnson, 1990) indicates that the entry of overseas bank is negatively
associated with the debility of banking sector. Their evidence also implies that the higher the
presence of foreign banks, the lower the likelihood of a banking crisis. (Papaioannou, 2009)
provides strong evidence that foreign banks alleviate the adverse consequences of (local)
banking crises. Examine the example of Malaysia during the crisis in 1997, foreign banks has
done a better job than domestic banks due to their overcome of profitable, efficiency and
larger pool of capital. This has helped Malaysia successfully weathered the crisis (Detragiache,
2004). In addition, (Mathieson et al, 2001) found that the local establishment of foreign banks
help the local credit to run better during the financial distress time. It is also worth mentioning
that compared to local banks, foreign banks performed strong loan growth with humble

associated volatility which leads to the contribution to larger stability in credit (Asiedu, 2002).
Even when in distress, foreign banks still have the financial backing from their parent banks
(Asiedu, 2002).

2.2.

Negative impacts of foreign banks on Vietnam

However, the presence of foreign banks rises some concerns. (David, 2014)indicated that the
entry of foreign bank can cause the fall in domestic lending. This drop can cause instability in
financial system notably in economic downturns (Kose, 2009). Though it is mentioned above
that subsidiaries of foreign banks can help a lot for the host country during the financial distress
because they are part of worldwide diversified entities but they can also impact host country with
contagion effect (Lipsey, 2002). Because this is when subsidiaries act as transmission
mechanisms for the policies used by their stockholders to solve the shock in particular economy
or region where they have invested. Besides, this foreign expansion can lead the host country to
the decline in financial resources (Gray, 2005). After collecting domestic savings, these foreign


banks can take that resource to finance in other countries as well. Economic growth can also be
slow down if these banks decide to lessen the supply of credit during financial distress for small
and medium businesses impacted by the problem of credit rationing (Gray, 2005).


III. CONCLUSION
With many reasons like that, no doubt there are more and more banks tend to expand abroad.
The benefits from entering of foreign banks have overweigh the drawbacks. Not only the host
country benefits about technology, management skills, spill over effects and also a large capital
funds. This has prospered the economy of banking sector and Vietnam in general.



PART B. INCOME OPPORTUNITIES AVAILABLE TO INTERNATIONAL BANKS
AND THE POTENTIAL IMPACT OF THE REGULATORY REFORMS SINCE THE
FINANCIAL CRISIS ON SUCH INCOME


I.

INTRODUCTION:

The rapid expansion of international banking has made a great impact on economies. This paper
will conduct the income opportunity that international banks gain when they decide the going
abroad. With four main types of income, international banks has increased their revenue more
and more. After the financial crisis in 2008, international banks income has been affected not
only because the crisis but also because of some regulatory like Basel III and Dodd-Frank Act.
This paper will investigate how these regulatory has impacted on international bank profit.


II.

BODY
1. Income opportunities available to international banks

(Matthews and Thompson, 2005) define international banking as the business performed
by banks across national borders along with the activity that engaged the use of different
currencies. When operating abroad, the market will be widen leads to the higher potential
customers for banks (Nigh et al, 1999). They can provide a variety types of banking and financial
services to earn income opportunities through their international operations. Money is basically
made from 4 major sources of income namely Net Interest Income, Net fees and commission
income, Net trading income and Investment income (Countries, 2009).

Like domestic banks, international banks have the same operation is to earn money from the Net
interest income (Sullivan, 2005). When entering into new potential markets, international banks
find it is not too hard to satisfy customers with any trends of financial services because they own
a lot of skillful and experienced staff as well as sound products (Nigh et al, 1999). Therefore,
they can seize the opportunity to raise income by collecting from the interests banks gained from
their financial products such as loans, overdrafts or credit cards (DeYoung and Roland, 2001).
Otherwise, the incentive for international banks to expand overseas is that they can earn
income through their syndicated lending services (Ivashina, 2010) . Two or more banks will
together provide this kind of loan because the project is too risky for a single lender to undertake.
Not only risks will be spread but also financial opportunities will be provided equally for the
lenders. Typically, the interest rates can be fixed or floating and will be based on LIBOR (Chui
et al, 2010).
Asides from Net Interest Income, multinational banks also have the chance to make
money from Net fees and commission income (Matthews and Thompson, 2005). This income
include a broad range of services from international banks like insurance, leasing, factoring,
intermediary service, foreign exchange currency services, management of cash, retail banking
customer fees; corporate banking credit-related fees (Ivashina, 2010). Take an example for this
kind of income, international banks can also gain profit from trading activity which they carry
out on behalf of customer asset managers (Ivashina, 2010).


Moreover, international bank can also earn from Net trading income (Matthews and Thompson,
2005). This is when international banks act as market maker, broker, trading derivatives,
commitments and offer guarantees like letters of credit and bills of exchange (Sullivan, 2005).
The profit can also be generated from Investment income which comes from underwriting,
mergers and acquisition activities and provide management for asset and wealth (Sullivan, 2005).
2. Potential impact of regulatory reforms since the financial crisis on such
income.

Although cross border operation can help international banks to earn profit but it is also

contained risks for them. International banks can be seriously affected by the financial crisis by
the contagion effect (Adrian and Shin, 2008). The most well known example for this affection is
the credit crunch in 2008. It has affected not only banking industry but also the whole economy
system (Adrian and Shin, 2008). After that crisis, the financial industry is now under scrutiny by
the reforming of many regulatory especially the Basel III, Frank Dodd Act (USA) to ensure
safety and stability of the financial system (Slovik, 2011).
2.1.Basel III:
International policy has response to the financial distress with regulatory reform in order
to identify a way to harmonies some existing standards and build new ones where gaps were
determined (Mendoza, 2015). The first regulatory has addressed the risk of financial
intermediaries by enhancing prudential regulatory standards, led by the reforms of Basel III.
Basel I and Basel II, as international standards for banking regulation, are not strong enough to
protect banking industry from the crisis. Basel Committee therefore has established Basel III to
address the lessons from the financial turmoil and to close the gaps with Basel II
(InternationalMonetaryFund, 2011).
In Capital base section, the framework now has only Tier 1 and Tier 2 capital and total
capital must exceed 8% of risk-weighted assets. It is used to be Tier 3 capital under Basel II but
it is then eliminated in Basel III (Mendoza, 2015). It also require minimum common equity to be
raise from 2% to 4.5%. According to (Hellwig, 2010) the risk calibration of capital demands
make international banks decrease regulatory capital and participate in more levered activities
which generate higher income and gain systemic interconnectedness. Therefore, international
banks when abide the framework can increase the quality, consistency and transparency for their


capital base which lead to more careful decision before lending and investing (Bierbrauer and
Hellwig, 2010). Unfortunately, when international banks raise the safety level through the
framework, there is also a cost. It will took an amount of money from their income because
banks have to hold extra capital and to be more liquid (Kretzschmar et al, 2010).
Besides the requirements for capital for counterparty default risk, banks have to include a
charge of capital to set-off the threat of potential mark-to-market losses (as known as credit value

adjustment-CVA- risk) which was not addressed in Basel II (Alexander, 2011). But it is
considered to cause more losses than those occur from counterparty defaults. The framework
also give introduction to the concept of Capital Conservation Buffer (Ivashina, 2010). With this
supplemental layer of capital which is determined higher than the minimum requirement, can be
drawn down during stress to absorb losses and sustain lending to the real economy. According to
European Banking Authority (2015a) reports, 15 largest EU banks had increased their CET1
ratios from 9.6% to 12.3% in 6 year period from 2009 to 2015 (Matthews and Thompson, 2005).
Along with that is the release of Countercyclical Buffer, a macroprudential tool, by setting up
capital buffer in good times that can be drawn down in bad times, banking industry can avoid
during the time of excess aggregate grow of credit (Slovik, 2011). With this regulation, banks
can ensure the risk coverage is under control. Nevertheless, there will be some disadvantage
when developing and implementing these buffer (Slovik, 2011). Because increase provisioning
to balance excess grow of credit can exacerbate the cycle lead to opposite of the intended effect
(Chui et al, 2010).


Table: Summary of CET1 capital requirements under Basel III compared to Basel II
Basel III also develops a simple, transparent based measure of risk called “Leverage
Ratio” to prevent leverage in banking sector and deliver supplementary safeguards against
model risk and measurement error. Besides enlargement requirements for capital, banks is now
regulated to meet a minimum Liquidity Coverage Ratio where banks have to hold sufficient
liquid assets to fully cover 30 days of funding stress along with the development of Net Stable
Funding to limit maturity transformation (Alexander, 2011). Also higher capital base means
international banks’ profit will be lower, banks therefore may seek out more insecure activities
which can expose systemic risk of banking industry (Hanson et al, 2010). This is a way to
constraint leverage in banking sector with the aim to lessen the risk of the destabilizing process
which can harmful the financial system. However, (Bierbrauer and Hellwig, 2010) imply that
when combine risk-weighted capital and leverage ratio and liquidity standards can distort the
original regulatory intentions. Thereby make banks invest in assets with lower risk weights and
switch to the shadow banking system through arbitrage of regulation (Bierbrauer and Hellwig,

2010). This can cause new bubble and more serious crisis in the banking sector. When banks


implement this regulatory, their credit activity will be narrowed, making it harder for them to
gain profit due to the poor lending activity (Rochet, 2010).
Besides, Basel III is very complex with hundreds pages, if international banks will have to create
many new full time compliance jobs which make a huge impact to their income opportunity
(Rochet, 2010).
2.2.Frank Dodd Act:
On July 21st 2010, Dodd-Frank Wall Street Reform and Consumer Protection Act (the DoddFrank Act) is enacted into federal law by President Barack Obama (US) as a response to
the financial turmoil in 2008 (NewYorkTimes, n.d.). The act gives guideline for big banks to be
supervised on basis of what they do instead of their corporate form. It also provides these banks
the concept of capital and liquidity buffers in order to restrict their relative size and their riskiest
financial activities (Hester and James, 2013). This Act introduces stricter regulation for banks to
prevent the re-occurrence the event in 2008 (Schultz, 2014).
In order to achieve this, the Act developed the Financial Stability Oversight Council
(FSOC) to solve the problem impacting the financial industry and to monitor systemic risk and
research the state of the economy (Hester and James, 2013). To save consumers from large
unregulated financial institutions, the Act is established of Consumer Financial Protection
Bureau (CFPB) with the aim to eliminate risky business practices that can badly impact
consumers with transparent and truthful information about mortgages (Schultz, 2014).
The key provision of the Act is the Volcker rule. This rule will prohibit banks from
making high-risk speculative investment. It will restrict banks from owning not more than 3% of
the total ownership interests in a private equity fund or hedge fund as if they are judged risky
(Beyer, 2015).
New tool to regulate risky called Credit Default Swaps (CDS) is also introduced in which require
greater expose to people on the swap trading to lessen the risks it exposed to the public (Neiman
and Mark, 2010).
According to (Beyer, 2015), since early 2012, the credit default swap fraction has decreased 22%
from 50% to 28% with only Deutsche Bank and Barclays are in the top 15. It has shown a

positive sign for banks since they were less being affected by the crisis.
It can be seen that the new law has contributed to balance the financial instability after
the crisis, lead to a stricter regulatory scrutiny on capital level (Duffie, 2012). The law therefore


has done significant progress in regulating all banks, including those that were considered as
“too big to fail”. The most valuable contribution is the higher prudential standards for capital
which make banks especially international banks more resilient to financial distress or crisis
Nevertheless, following the Act, international banks needs to have a higher percentage of
assets in cash (Schultz, 2014). This will reduce the amount they can hold in marketable securities
which can limit the bond market-making role that banks normally undertake. When banks are not
being able to join as market maker, potential customers will find it difficult to finding
counteracting sellers. (Hester and James, 2013) also give empirical evidence that the new law has
become a burden for all banks because of high compliance costs (Brewer, 2016). It also act as a
deterrent of competitiveness of the US Banks vis-à-vis foreign banks. The low-interest rates
after the crisis affected banks’ profitability make it hard to sustain operation (Campbell et al,
2009). According to a report by Federal Reserve Bank, only a small number of banks were
established under the Law while many other have either closed or consolidated. The Act has
therefore limit banks in generating profit, makes it harder for banks to expand their activity
(Robinson et al, 2014).


III.

CONCLUSION:

Together these reforms has addressed the regulatory weakness that allowed the
unregulated enlargement of shadow banking and too big to fail companies. They
build a fundamental for economic recovery. However, because of the safety and
strictly like that has made international banks decrease their lending activity, build a

complex capital base and cost a lot for the compliance costs which will directly affect
to their income opportunities.


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