Why are UK Banks Overseas Assets and Liabilities So Large?
David Chaundy ESRC Centre for Business Research – Working Papers from ESRC Centre for Business Research Abstract: The overseas assets and liabilities of UK banks account for over 50% of the overseas assets and liabilities of all UK residents and almost 50% of UK banks’ total assets and liabilities. They are much larger than the overseas assets of banks in other developed countries. This paper adopts an institutional, theoretical and empirical approach to explain the large size of these overseas assets. We find that over 80% of these assets and liabilities are accounted for by foreign-owned UK banks and their large size may be traced to the development of the Euro-currency markets in London in the late 1950s and 1960s. Although net overseas bank assets can, in principle, be explained, the gross assets are more problematic. The theoretical literature is quite limited and the most appropriate macroeconomic framework would be complex and difficult to apply. We therefore examine some simple
