Journal of International Financial Markets, Institutions and Money 12 (2001) 299 – 320 Openness, profit opportunities and foreign banking Luis G. Dopico a , James A. Wilcox b, * a Auburn Uniersity, Auburn, AL 36841, USA b Haas School of Business, Uniersity of California -Berkeley, Berkeley, CA 94720 -1900, USA Received 15 July 2001; accepted 7 March 2002 Abstract Using new data from the World Bank and OCC surveys, we show correlations across a wide range of countries between foreign banking and domestic economic, financial and bank regulatory conditions. Foreign banking tended to be more prevalent in countries that were more open to foreign ownership of their banks, more open to banks’ engaging in a wider range of financial activities and more open to international trade. Restrictions on foreign ownership of domestic banks that were in place in the late 1970s reduced the current extent of foreign banking. Foreign banking was negatively correlated with current restrictions on banks’ securities, insurance and real estate activities. Countries that had more international trade tended to have more foreign banking. Foreign banking was more pervasive in countries where banking was more profitable and where the domestically-owned banking sector was smaller relative to GDP. © 2002 Elsevier Science B.V. All rights reserved. Keywords: Foreign banking; Foreign ownership; Openness; Bank profitability; Liberalization JEL classification: F23; F36; G21 www.elsevier.com/locate/econbase * Corresponding author. Tel.: +1-510-642-2455; fax: +1-510-642-4700. E-mail addresses: lgdopico@mindspring.com (L.G. Dopico), jwilcox@haas.berkeley.edu (J.A. Wilcox). 1042-4431/02/$ - see front matter © 2002 Elsevier Science B.V. All rights reserved. PII:S1042-4431(02)00016-1