Recent Changes In Global Financial Markets

The decade of eighties witnessed unprecedented changes in financial markets around the world. The seeds of these changes were however sown in the 1960s with the emergence of Euromarkets, which were a sort of parallel money markets, virtually free from any regulation. This led to internationalization of the banking business. This market grew vigorously during the seventies and pioneered a number of innovative funding techniques. The outstanding feature of the changes during the eighties was integration. The boundaries between national market as well as those between and offshore markets are rapidly becoming blurred leading to the emergence of a global unified financial market. The financial system has grown much faster than real output since the late seventies. Banks in major industrialized countries increased their presence in each other's countries considerably. Non-resident borrowers on an extensive scale are tapping major national market such as the US, Japan, Germany. Non-resident investment banks are allowed access to national bond and stock markets. The integrative forces at work through the eighties have more or less obliterated the distinction between national and international financial markets. Today both the potential borrower and the potential investor have a wide range of choice of markets. In addition to the geographical integration across market there has been a strong trend towards functional unification across the various types of financial intuitions within the individual markets. The traditional segmentation between commercial banking, investment banking, and consumer finance and so on, is fast dis-appearing with the result that nowadays "everybody does everything".  Universal banking intuitions/bank holding companies provide worldwide, a wide range of financial services including traditional commercial banking.  The driving forces behind this spatial and functional integration were first, liberalization with regard to cross-border financial transaction and second deregulation within the financial systems of the major industrial nations. The most significant liberalization measure was the lifting of exchange controls in France, UK and Japan.International bodies such as the IMF have already begun drawing up blueprints for a new architecture for the global financial system.