Benefits and Risks of Financial Globalization

One of the major benefits of Financial Globalization is that the risk of a “credit crunch” has been reduced to extremely low levels. When banks are under strain, they can now raise funds from international capital markets.

Another benefit is that, with more choices, borrowers and investors get a better pricing on their financing. Corporations can finance the investments more cheaply.

The disadvantage is that the markets are now extremely volatile, and this can be a threat to financial stability. Financial globalization has altered the balance of risks in international capital markets.

With financial globalization, creditworthy banks and businesses in emerging markets can now reduce their borrowing costs. However, emerging markets with weak or poorly managed banks are at risk.

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