Analyses of Malaysian Bank Companies Branching Branches into International Market; a Case Study of RHB Bank
Case Study Assignment
EBB 6143: Money, Banking and Financial Market
GEORGE ANAK JABU
Corporate Master of Business Administration
Semester 5/ Session 2011-2013
Since financial crisis 1997/1998 there has been a very large expansion in the number of bank branches in Malaysia and into international market and in the number of communes served by branches. These developments are variously a consequence of market pressures, ASEAN’s plan to open up their market for their countries member and Malaysian Bank Firm should answer these challenges and do some action to branching out their bank in ASEAN country. For instance, RHB Bank already open branch in Singapore, Brunei and Thailand. It is somewhat surprising, in a period short when a young establishment banks such as RHB Bank are increasingly adopting modern style of international business of banking system and those the biggest challenge is that such large brick and mortar investments should be occurring.
The East Asian financial crisis of 1997 highlighted the link between financial liberalization and instability of the banking sector. All five countries, Malaysia, Thailand, Korea, Indonesia and the Philippines, had deregulated their banking systems some time before the onslaught of that banking debacle. In line with the doctrine advocated by McKinnon (1973) and Shaw (1973), these countries had deregulated their financial system with the objective of creating a more efficient and competitive market driven financial sector. Developing an efficient system is the essence of financial liberalization. There exists studies that have found how financial development can stimulate growth; such as the studies by King and Levine (1993) and Johnston and Pazarbasioglu (1995). On the other hand, of late, numerous studies indicate that there are dangers on the road to liberalization (Diaz-Alejandro (1985), Akyuz (1992, 1993) Cole and Slade (1998) and Demirgic-Kunt and Detragiache (1998), Kanaya and Woo (2000) and Zhuang (2002)).
The goal of this paper is to do SWOT analysis of RHB bank branch expansion into international market and they are concentrated on ASEAN market. Branches are the principal interface between banks and their clients. The distribution of branches within and across provinces defines markets for financial services, because branches are where deposits are held and loans are arranged and where most Malaysian investors execute transactions for stocks, bonds, and mutual funds. Further, Malaysian has large numbers of small firms relative to most other countries in ASEAN market or in the global market. Small firms are very dependent on banks for short-term credit and for funds which allow flexibility in responding to shocks. If banking markets were to become more concentrated to domestic market, through the process of branch expansion, Malaysia’s small firms operating in ASEAN market environment could suffer. If more branches were increasingly sited in affluent areas of the ASEAN countries, the distribution of income and wealth could become more unequal. LITETERATURE REVIEW
The literature on the economics of bank branching is fragmentary and diffuse. In the U.S. it is in large part a segment of the literature on banking market structure, which has been surveyed by Gilbert (1984), Berger, Demsetz and Strahan (1998), and Berger and Mester (1999). Gilbert reports that studies of bank operating results in U.S. states, which had different branching laws until quite recently, have produced a wide variety of results. He attributes this muddle to an absence of strong theoretical specification, weak data, inappropriate estimation techniques, and a failure to recognize the effects of regulation on performance. These studies began to appear in the 1960s when a wave of bank mergers and related anti-trust court cases occurred.