The three decades before the 2007-08 global financial crisis were marked by the world’s financial networks becoming increasingly interconnected. Financial system regulatory convergence, the growing penetration of World Trade Organisation rules and the creation of currency unions, such as the euro, resulted in a surge in cross-border capital flows. Global banks began to see the emergence of a single international marketplace, and the potential this held for revenue and asset growth. In 1998 co-chairman of the freshly formed Citigroup, Sandford Weill, announced the dawn of a new age of banking in which large institutions would act as financial supermarkets to the world, with their activities so diversified that they would be able to withstand downturns of the global economic cycle.

Citigroup was not alone in this view: major financial players such as the Royal Bank of Scotland (RBS), Deutsche Bank, BNP Paribas, Barclays, HSBC, Crédit Agricole, UBS, Bank of America, Société Générale and JPM organ Chase grew their international businesses on the back of a rising tide of global capital, which saw cross-border transfers rise from $500bn in 1980 to a record high of $12.4trn in 2007.

Disappearing Act

The global financial crisis which started that year, however, brought an end to this trend. According to data from McKinsey Global Institute, cross-border capital flows had declined by more than 80% from their peak by 2009, reduced to a level lower than that seen in the early 1990s. By 2016 cross-border capital movement had risen to $4.3trn, above levels in the late 1990s, but still 65% lower than the high of 2007.

During that period, banks offloaded foreign assets acquired during boom years, and the foreign claims of banks in the eurozone slumped by $7.3trn, or around 45%, as a result of this de-risking process. The primary driver of this trend was a reassessment of risk attached to foreign business, and the realisation that in many cases the revenue and margins obtainable in home markets – where banks enjoy the benefits of scale and local knowledge – are higher than those found abroad.

Since 2008 there has also been a gradual withdrawal of global banks from both developed and emerging markets. In 2014 Citibank announced that it was withdrawing from 11 markets, including Egypt, the Czech Republic and Japan. The announcement followed similar withdrawals from consumer markets in Pakistan, Uruguay and Spain, and left the bank’s global footprint at 24 countries – half that of 2012. HSBC, meanwhile, has retreated from more than 20 markets since 2011, including Chile, Peru, Colombia, Jordan, Kuwait, Thailand and South Korea.

In 2015 Deutsche Bank announced that it would shed 9000 full-time jobs by 2020 and close operations in 10 countries, including Argentina, Chile, Mexico, Malta and New Zealand. However, the bank announced in March 2020 that it was pausing future retrenchments to minimise uncertainty for staff amid the Covid-19 pandemic. This announcement came as other major lenders reassured employees that their jobs would remain secure, despite the economic effects of the virus on their businesses.

Nevertheless, as Deutsche Bank still plans to cut 18,000 jobs by 2022, the trend is clear: many of the world’s biggest banks are withdrawing from the advances they made in the 1990s and 2000s in order to focus on their domestic bases.

Regulatory Pressures

The reasons multinational banks give for the closure of overseas businesses generally include improved profitability, income stability, more efficient allocation of capital and political instability. The most frequently cited reason, however, is the question of regulation. A 2016 analysis by Spanish banking group BBVA of banks from the US, Canada, the UK, Sweden, Germany, Austria, the Netherlands, France, Italy, Spain and China found that regulation was the key driver in the trend of banks pulling out of certain countries and business lines. Regulatory pressure points include the introduction of stricter capital and liquidity requirements, the ring-fencing of wholesale and investment banking from retail banking, and the different speeds at which countries are implementing banking reforms.

In addition, new reporting standards and a tougher stance on money laundering and illegal activities by the world’s major regulators over the past 10 years have further encouraged geographic contraction. Banks doing business on a global scale have found it difficult to avoid the $800bn-2trn of “dirty money” that the UN estimates is laundered annually, and which has become a matter of interest to law enforcement agencies around the world.

Money laundering and fraud scandals have resulted in multibillion-dollar fines on global banks from the US Department of Justice, and shareholders have become wary of foreign ventures where proper scrutiny of capital may be more difficult to conduct than in their home market. Consequently, the global reach once seen as a fundamental strength of large banking groups is increasingly viewed as an unwelcome liability, with lenders open to regulatory and financial risks as they struggle to manage their geographically dispersed businesses effectively.

Correspondence Decline

The withdrawal of global banks from emerging markets is not limited to the closure of head offices and branches. Indeed, there has also been a decline in the number of correspondent relationships – where one lender provides services such as wire transfers and deposit acceptance on behalf of another – between large multinational players and smaller, regional banks. Correspondent banking relationships are considered to be important facilitators of the global economic system, and therefore any change in their status is a significant matter of concern for regulators.

A 2017 paper on the subject published by the IMF found that some emerging economies have been more adversely affected than others by this trend. In Belize, Iran, Liberia and Sudan, for example, there has been a considerable decline in the number of correspondent relationships, which has increased financial sector fragility and exposed some lenders to a potential ratings downgrade.

However, in markets such as Kuwait, the Bahamas, Morocco, Saudi Arabia and the UAE, the withdrawal of global banks from correspondent banking relationships has been less marked. In some cases, such as Kuwait, domestic banks acted pre-emptively to reduce the perception of risk associated with their operations, which might have otherwise prompted global banks to cut relations. Actions taken in this regard included closing the accounts of certain domestic charities and foreign exchange houses.

However, the challenge of maintaining correspondent banking relations for institutions with smaller capital bases remains a significant one. “It has definitely been an issue for smaller banks, where carrying out a more thorough risk assessment by foreign correspondent entities is more difficult,” Ronald Harford, chairman of Trinidad and Tobago’s Republic Financial Holdings, told OBG. “In addition, smaller banks do not usually have the capacity to certify that deposits do not have an origin in certain activities, such as gambling.”

New Opportunites

The retrenchment of international banks over the past decade has resulted in opportunities as well as challenges. Regional lenders, which had for decades fought for market space with large global institutions, have welcomed the chance to move into the recently vacated territory.

In some parts of the world this process has been an incremental one, characterised by domestic banks boosting their lending capacity through large bond issuances or initial public offerings, and using their stronger financial bases to move into nearby markets. In other regions, large domestic players have bought large amounts of foreign assets, quickly establishing themselves as regional giants.

Another key differentiator of international players and domestic banks is the comprehensive product array offered by the former. In order to fill the market space left by global banks, domestic players have been compelled to match their erstwhile rivals product by product, resulting in regional banks that are capable of performing more functions for a wider array of customers than before.


Regional lenders from Africa’s most vibrant economies, such as Nigeria, Morocco and South Africa, have been quick to seek out the market space left by departing global players. Nigeria’s biggest lender, GTB ank, first stepped outside the domestic market in 2002, but since 2013 has pursued a more aggressive expansion strategy. Its acquisition of a 70% stake in the Nairobi-based Fina Bank Group gave it an East African foothold, and a strong digital offering has established it as one of the drivers of digital banking in the region.

Nigeria’s United Bank for Africa (UBA) also has pan-African ambitions, having started its expansion with a move into Cameroon in 2007. As of early 2019 UBA had 18 African subsidiaries, which account for 20% of the group’s balance sheet – a figure the bank intends to increase to 50% in the future. Moroccan banks, meanwhile, have been competing with global lenders across the continent since the early 2000s, and are now enthusiastically grasping the opportunities presented by the withdrawal of global players.

Leading the pack is Attijariwafa Bank, which took over Barclays Egypt operation in 2016 and is now present in 16 African markets. In 2018 Moroccan banks had some 50 subsidiaries in 25 African countries, and as income growth has slowed in their home market, their continental holdings are providing them with vibrant revenue streams. Approximately 28% of the consolidated net income of Attijariwafa Bank, Banque Centrale Populaire and BMCE Bank of Africa was derived from African subsidiaries in 2017.


Some GCC markets have been particularly affected by the retreat of international players. Since the 2007 global financial crisis, for example, the UAE has lost RBS, Lloyds, Barclays and Standard Chartered, though HSBC has strengthened its presence. However, some regional lenders have made their own expansionary moves into economies beyond the Gulf. For example, Qatar National Bank, which until recently was the biggest lender in the region in terms of Tier-1 capital, opened its first foreign branch in London in 1976, before implementing an international expansion strategy that has resulted in a presence through subsidiaries or associates in more than 30 countries.

While a desire to protect domestic firms has traditionally curtailed intra-GCC expansion, some lenders have successfully overcome this hurdle. In 2017 the Bahrain-based Gulf International Bank took a significant step towards its goal of becoming a pan-GCC institution when it won approval from Saudi Arabia’s Council of Ministers to establish Gulf International Bank – Saudi Arabia, thereby becoming the first foreign-domiciled bank to be granted a local commercial banking licence in the Kingdom.

A phase of banking sector consolidation is also sweeping the region, creating new lenders with balance sheets capable of financing large projects. Saudi Arabia’s first bank consolidation in two decades saw SABB agree to complete a merger with Alawwal Bank in the first half of 2019. Abu Dhabi Commercial Bank, the emirate’s second-largest bank, merged with Union National Bank in May 2019. The new entity also acquired Al Hilal Bank in December 2019 to form a new player with around Dh405bn ($110.2bn) in assets. With more than 70 listed banks in the GCC’s crowded market, more mergers and acquisitions are expected over the short term.

Latin America

Many multinationals such as HSBC, Citigroup and Credit Suisse have sold or reduced their operations in Latin America since 2013. While some players with strong franchises in the region, such as Santander and BBVA, remain, opportunities for regional banks to extend credit across the business spectrum have risen.

Six of the 10 biggest regional banks in 2018 were headquartered in Brazil, and the largest players, such as state-owned Banco do Brasil and private lender Itaú Unibanco, have established a solid presence across the continent. Itaú’s cross-border acquisitions, in particular, have set it up to become a truly pan-Latin American institution: in 2014 it merged with the Chilean bank CorpBanca, a move which also saw CorpBanca’s Colombian and Panamanian operations rebranded under the Itaú name.

Colombian banks sought regional expansion, too, with Bancolombia’s acquisition of El Salvador’s largest bank in 2007 marking the beginning of this process. Colombia’s Grupo Aval, parent company of Banco de Bogotá, has also invested heavily in the region, acquiring Banco de América Centra Credomatic’s operations in 2012 and BBVA’s Panama unit the following year. By 2017 Colombian banking groups controlled 53% of the financial system of El Salvador, 25.5% of Panama’s and 21% of Costa Rica’s.


Regional banking growth has seen domestic and cross-border loans in Asia (excluding Japan) rise from $7.8trn in 2008 to $17.6trn in 2018. Chinese institutions have recorded especially strong growth, expanding their lending portfolios at a compound annual rate of 17% over this period. They have also shown a willingness to take on more credit risk than Western counterparts, offering leveraged loans to private equity firms at up to eight times earnings before interest, tax, depreciation and amortisation (EBITDA), while most US and European banks are limited by credit risk rules to around four times EBITDA.

Banks from Taiwan, India, South Korea, Japan and Australia have ramped up regional operations, as have lenders from the smaller markets of Singapore and Malaysia. The latter’s Maybank doubled its market share as bookrunner for Asian syndicated loans (excluding Japan) in 2017, according to Bloomberg.