Globally Active U.S. Banks: Bridging American Businesses And International Consumers
In an era of increasing interconnectedness, globally active U.S. banks allow American businesses to reach consumers in every corner of the globe. As highlighted by a new HPS report, due to economies of scale and the depth of their expertise, these banks help businesses meet growing consumer demand abroad while facilitating job creation and economic growth at home.
While the United States has long been the world’s economic powerhouse, technological innovation and increasing interconnectedness in goods, capital, and people over the past decades have lifted millions out of poverty and created a thriving global middle class. With their newfound purchasing power, consumers in these emerging markets have generated a steadily growing demand for goods and services, creating an unprecedented opportunity for U.S. businesses.
Globally oriented U.S. businesses drive the American economy, supporting 71.2 million jobs and generating 54 percent of private sector GDP. By tapping into worldwide consumer growth, these businesses will be able to create new jobs and strengthen American competitiveness in health care, technology, and many other industries.
According to Yale professor Charles Calomiris, global banks help companies conduct “transactions in scores of countries and in hundreds of different products.” Through financing supply chains and underwriting one-third of the world’s trade financing, these banks ensure American businesses remain key players in global markets and generate economic benefits both home and abroad. Ninety percent of U.S. multinationals rely on large U.S. banks for overseas operations. Further, these banks underwrite 50 percent of all corporate bonds and provide 48 percent of all loans to U.S. businesses, serving as an important source of credit.
Many U.S. businesses earn a growing proportion of their revenue abroad, increasing their need for global financial services support. Globally active U.S banks can effectively support American businesses through their size, which allows them to operate more efficiently.
It is important to keep in perspective the true size of America’s largest banks relative to their peers around the world. The world’s largest banks currently represent a mix of Asian, North American, and European countries. While globally active U.S. banks are critical for opening up new markets for American business, the banking system remains relatively smaller and less concentrated than its peers abroad.
If we cede the United States’ dominant position in global financial markets by reducing the size and international reach of our banks, other countries will step in, which would only hurt American businesses and slow economic growth.
Thanks to the services that globally active U.S. banks provide, the U.S. continues to play a key role in the global economy, sending goods and services around the world. As consumer demand continues to grow in emerging markets over upcoming decades, banks with the size and scope to help businesses navigate the global marketplace will only become more important.