Introduction to the 2022 Bank Internationalization Index

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2022 ZIBS Forum, on the theme of "Redefining the Triple Helix: Technology, Business, and Education in Digital Era", was successfully held on 5 Jan 2023. Scholars and subject-matter specialists presented their recent research findings on digital technology, innovation management, corporate strategy and sustainable development besides other fields of business studies.

The third part of the forum revolved around university-industry collaboration and commercialization. In this session, ZIBS Assistant Professor LI Yuanqi presented his research work — "Bank Internationalization Index in 2022", which was completed under the support of Professor BEN Shenglin and the project team members. Here's the review:

The global recovery from the pandemic last year was challenging, and this year's Bank Internationalization Index takes place against this backdrop. Some countries represented by China contributed significantly to globalization, while we continue to face growing threats of de-globalization events. 

1

BII Journey & BII Ranking

Up to 2022, our BII project has been conducted for the eighth consecutive year in exploring the internationalization of banks, and we've finished writing 8 monographs in these periods. This year, the number of banks covered in the research has extended to 150, referring to 15 developed entities and 16 developing entities. The following table lists the largest international banks in the world this year. All BII indexes are ranked from 3 perspectives. For global banks, Standard Chartered gets 74.4, which is the highest score, and the top 8 banks all come from developed countries. Through calculating the mean value, we find that the average score of banks in developed countries is more than twice as high as that of banks in developing countries.

The pattern of BII changes between 2007 and 2021 is depicted in the following table. The 3 lines in different colors respectively represent banks in developed entities, developing entities and all countries. For one thing, the BII score of developed countries is always higher than that of developing countries. For another, the 3 lines share a similar trend, experiencing gentle improvement from 2008 to 2016, while suffering significant decline until 2020. In 2021, banks in developing countries had a breakthrough in internationalization. BII growth rate of developing countries in 2021 is 4.2 times that of developed countries. The growth rate in Asian regions is 5.1 times higher than that in European regions.

Here are the 2 sub-dimensions (overseas assets and overseas revenue) behind BII. First, it can be seen from the ranking that the overseas asset scale of the top 20 banks accounts for 80% of the total sample pool of banks. The level of regional concentration is high, including 9 banks from Europe, 5 from Asia, and 6 from North America. From the ranking of the proportion of overseas assets, there is a significant advantage in top 5 banks. The average proportion of overseas assets of top 5 banks exceeded 74%. An interesting point is that only 12 banks are in both top 20 lists, which means the scale of overseas assets is not correlated to the proportion of overseas assets. From a national perspective, the overseas asset scale of the United Kingdom is the highest and also has a high proportion ranking. The proportion of overseas assets of Chinese banks is the lowest.

From the ranking of overseas revenue scale, we can also see the characteristics of high scale concentration and high regional concentration. From the proportion of overseas revenue, we can see that European banks are far ahead of banks in other regions. From a national standpoint, the United States has the highest scale of overseas revenue and ranks in the middle of the proportion ranking. The proportion of overseas revenue for Chinese banks is still the lowest and there is a long way to go.

2

Internationalization 

of Chinese Banks

In the development process of the 10 years, Chinese banks have shown relatively ideal progress and have made great achievements, such as doubling the number of countries where they operated overseas, increasing their overseas assets by 2.6 times, and increasing their overseas revenue by 2.9 times. Meanwhile, between 2011 and 2021, the gap between Chinese and global banks narrowed gradually. The ratio of the mean BII of global banks to the mean BII of Chinese banks decreased from 3.77 to 1.92.

For the Chinese Banks in BII Ranking, Bank of China ranks global top 25. As an international pioneer, its scale and proportion of internationalization are far ahead. Four companies, including Industrial and Commercial Bank of China, Agricultural Bank of China, China Citic Bank, and Bank of Communications get into the top 30-50 ranks. The size of their overseas assets has shown global impact, but their overseas development needs to be further improved. The internationalization process of other Chinese banks, including indicators such as overseas asset proportion and overseas revenue proportion, still needs to be developed.

When we compare Chinese top 2 banks to Global top 20 banks, we can see that the scale of Chinese top 2 banks' overseas assets and revenue is far greater than that of Global top 20 banks. However, the proportion of overseas assets and revenue is less than half of the global top 20 banks' average value.

3

The Strategic Importance 

of Macao

Nowadays, the banking sector in Macau is highly internationalized. At present, there are 31 banks in Macau, 12 of which are locally incorporated (including a postal depository) and 19 of which are registered abroad. Due to its special historical origins, Macau has always been a bridge between China and Portuguese-speaking countries. It is uniquely positioned to build a service platform for business cooperation between China and Portuguese-speaking countries.

In 2021, the general plan for building a Guangdong-Macao in-depth cooperation zone in Hengqin was issued. The plan proposes to give full play to Macao's role as a window to Portuguese-speaking countries. Today, the new pattern of synergistic development in the Hengqin-Guangdong-Macao Deep Cooperation Zone has gradually taken shape.

Macao has developed strong financial strength and strategic policy support. It also has featured opportunities such as relying on financial technology to build smart banks, following the layout of special financial development, and helping the development of emerging markets.

Nowadays, globalization and counter-globalization continue to clash, and the risks of international business are gradually increasing. The supporting and leading roles of the Guangdong-Hong Kong-Macao Greater Bay Area in opening up to the outside world will become increasingly significant.

*This article is based on the speech made by ZIBS Assistant Professor LI Yuanqi at 2022 ZIBS Forum. The views and opinions expressed in this article are those of the speaker and do not necessarily reflect the views or positions of ZIBS.

LI Yuanqi

Assistant Professor

LI Yuanqi graduated from Tsinghua University with a bachelor's degree in Basic Science of Mathematical and Physics, and a Ph.D. in Finance from the School of Economics and Management of Tsinghua University. He was in charge of FOF macro strategy research in the Asset Management Department of China International Capital Corporation. He has participated in the research work of the People's Bank of China, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission. His research interests include financial technology, green finance, behavioral finance, and business models.

Writer｜ZHANG Shengqun (iMF 2022)

Editor｜LI Songjiao, XU Fan

Managing Editor｜CHENQI Lisha, LI Yuanqi

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