Banking became international for the first time in the nineteenth century when the international money market grew large enough to enable banks to refinance themselves on that market. Until World War I, the international money market rested on bankers' international acceptances – trade bills endorsed by reputable London merchant banks. The banking crisis of the 1930s put an end to that era. In the immediate postwar years, cross-border flows took the form of direct investment (FDI) by multinational firms; this was an instrument of marginal financial importance, for it was neither mediated by banks nor traded on markets. International banking took off again with the emergence of the Euromarkets, initially a London-based offshore interbank market in short-term dollar-denominated deposits. The Euromarkets made possible a rapid expansion of international banking. Banks lent or borrowed liquidity on the Euromarkets at rates that were more advantageous than those obtained on regulated domestic markets.

Banking internationalization was at first hindered by the Keynesian–Phillips synthesis that dominated macroeconomic policy. It was generally believed that wages were sticky and full employment unreachable without government managing consumers' demand for goods. Governments, seeking the right mix of price stability and employment, viewed cross-border flows as an irritant. Inflation led most OECD countries to restore capital controls in the 1960s and 1970s. Euromarkets developed on an offshore basis, in breach of acceptable economic practice. It is only in the 1980s that internationalization became a deliberate policy, which governments pursued to improve the efficiency of their financial system.