| dc.description.abstract | TOWARDS THE END OF GEOGRAPHY?
A CASE STUDY OF THE INTERNATIONALIZATION OF THE NORWEGIAN BANCING SECTOR
This study focused on the internationalization of the Norwegian banking sector. The background for the study was the liberalization process of the Norwegian regulatory framework that has been taking place for more than a decade and that recently culminated with the ratification of the European Economic Area (EEA) agreement. The EEA implied that foreign owned banks could for the first time be organized as branches in Norway and that these branches could be under home country control, and not host country control as previously. Thus branches of foreign banks operating in Norway could therefore escape the implications of regulatory differences between Norway and other EEA Member States, since they are under foreign country supervision. In accordance with the these changes, this study addressed whether an End of geography scenario was occurring in the Norwegian financial system.
Based on an understanding that the end of geography scenario requires both an internationalized market and an internationalized regulatory framework, the main argument of the study was that the Norwegian banking sector does not fulfill these conditions. In particular, the study defined the main dependent variable, economic internationalization, as activities of resource allocation that transcend the jurisdiction of a single national authority. This variable was divided into two subunits, government regulations and the national market itself, which were discussed in Chapters 3 and 4, respectively with regard to the degree of internationalization, and it was argued that there is an asymmetric situation in the Norwegian banking sector. On the one hand, the Norwegian government regulation has become so internationalized that the regulatory barriers a foreign entrant faces are minuscule. On the other hand, the market itself continues to have an overwhelming national profile. Moreover, as long as foreign penetration of the Norwegian banking market remains low, government regulations will remain disproportionately internationalized.
Chapter 5 and 6 were devoted to analyzing the reasons for this asymmetrical situation. Chapter 5 discussed the internationalization processes of regulatory framework of banking. Norway's internationalization of regulations were described in terms of an institutional reproduction of the liberal domestic regime at the international level. The main argument was that this can be described as a "path dependent development" achieved through the mechanism of reciprocity.
Specifically, it was argued that eertain attributes of the regional internationalization proeess (the adoption of the EEA) and the global proeess (the GATS), have eonditioned Norwegian banking regulations eoncessions. It was shown that the eoncept of reeiprocity is engraved in both structural and eonduet regulations, in the forms of reeiproeal market aeeess and natlonal treatment measures, respectively. These attributes explain the GATS' failuI-e to have an significant impact on Norwegian banking regulations, as exemplified by Norweglan Schedule of Speciiic Commitments. In eontrast, the discussion of the adoption the EEA showed that both the First and Seeond Banking Directives have significantly contributed to the internationalization of the Norwegian regulatory framework. In faet, by ratifying this treaty, the Norwegian banking regulåtion was liberalized to such an extent that it in fact placed foreign banks at an competitive advantage compared with their Norwegian eompetitors.
Chapter 6 discussed the reasons for the low penetration of foreign banks in the Norwegian banking market. By employing Dunning's eclectic OLI paradigm, the different factors explaining foreign investment were grour)ed into three categories, or so-called "adv.lntagcs": Locational-, Ownership and Internalization specific. The basie argument presented is that the small market size seem to have an negativc effect on FDI (locational advantage), there are some indications of "follow your client" hypotheses (ownership advantage), and the theoretical and empirical findings of economes of scope and scale in baking are inconclusive (internationalization advantage). In conclusion thcrefore, the Norwegian banking seetor does not fulfill the conditions of an End of geography scenario. The diserepaney between an Internationalized regulatory framework and an enduring national profile of the Norwegian banking market eontinues despite more than a decade of liberalization of the government rezulations. | nor |