This comprehensive article reviews the whole question of how banks can create value from cross-border activities. It starts by trying to explain banks’ recent fierce appetite for internationalisation. The financial crisis of the last two years has sharpened the authors’ perceptions of the motivations behind this enthusiasm – they identify the opportunistic rush to exploit liberalisation, the desire to imitate and fear of being left out as leading to indefensible levels of ‘irrational exuberance’, fuelled by fin de siècle hubris and CEOs’ desires for ‘Napoleonic personal grandeur’ at the expense of shareholder (and wider) interests.

Trying to source the potential for value creation, they follow Ghemawat’s Triple-A framework to position bank’s adaptation, aggregation and arbitrage opportunities, but find little coherence and much complexity. In the retail sector, especially, they note how the ‘dominant need to adapt to national markets’ inevitably limits the potential for cost economies from integrating functions and activities.

They fear that diversity across businesses, products, functions and customer groups is producing a complexity beyond managers’ comprehension. Management of risk is ever-vital – but here, they find trust in the future replicating the past, and in risk being quantifiable fallacious. Instead, they suggest some rather unnerving opposites – that, in truth, the future will always differ from the past, and that, ultimately, risk may be inherently unmodelable.

Searching for some useful lessons, they identify some reliable elements: that having superior resources and capabilities which can be successfully transferred to host countries is a sine qua non; that business segments, strategies and entry modes must ‘fit’ together; that risk assessment is too subtle for automation, and needs tacit, experienced know-how; that profit and growth targets are unsuitable tools for guiding performance management; and that a solid self-knowing, ‘clan-based’ corporate culture can be a vital ‘glue’ in guiding management choices. To succeed, future financial sector internationalisation moves, they enjoin, should be characterised, not by the type of headlong dash for growth that has left world economies reeling, but by a ‘cautious and sequential progress with a heavy emphasis on experimentation, adaptation and learning.’

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