The studies on quantitative impact of Basel II seem to indicate that the foreign banks operating in emerging economies would require less regulatory capital and by virtue of their lower capital servicing costs, could finely price their products and services to the detriment of domestic banks. However, it is too early to assess the advantage, if any.
The policy-makers in emerging countries are fully aware of both the benefits and risks arising out of the presence of foreign banks and indeed foreign capital in banks, which leads them to impose a variety of forms of restrictions depending on the circumstances of each country.