Download international Banking

International Banking
Motivations: Access to dollar and Eurocurrency
deposits and international saving markets.
 Tasks of International Banking:
•
•
•
•
•
•
•
•
Financing exports and imports
Trading foreign exchange
Underwriting both Euro-bonds and foreign bonds
Borrowing and lending in Euro-currency market
Participate and organize foreign exchange market
Project financing
International cash flow management & fund transfer
Solicitation for local currency deposits to operate as full-service
banks
• Serve as consultant for MNC
Gravurev.ppt
MENU
Risks in International
Banking
1. Commercial Risk
•Facing difficulties in receiving the repayments
of principal and interest on due date.
•Lack of financial and economic information about
the clients and host countries and differences in
accounting disclosure practices and legal
procedures.
2. Country Risk
•Sovereign Risk: political, jurisdictional and
cultural differences.
•Exchange Rate Risk: shortage of foreign exchange
reserves; change in repayment schedules.
MENU
Advantages and Disadvantages of
International Banking
Advantages
• High rate of return for investment and relatively low loss ratio
• Ability to diversify loan portfolio.
• Excess demand for international loans, especially for development
programs.
• Usually international loans are safeguarded by official and non-official
insurance agencies, such as export credit insurance.
Disadvantages
• Unfamiliar political and social environments and rapidly changing
macroeconomic and financial variables.
• Unexpected events and regulators.
• Weak demand for domestic loans has relaxed standards for
international loans.
• Only a few credit-worthy countries are available.
• External debt problems of many foreign international countries,
especially Latin American countries and major international loan loss
by many international banks.
MENU
Types of International Bank
Offices

Correspondent Banking

Two way link between banks (home and foreign bank); services offered
include, but not limited to: accepting drafts, honoring L/C, and furnishing
credit information.
 Representative Offices
• Cannot accept deposits, make loans, accept L/C or cash checks; just help
and advise parent bank clients when they are doing business in host
country.
 Agencies Relationship
• Like branch banking without having authority to accept deposit from the
public; may accept deposits from other banks; can arrange loans, L/C and
trade foreign exchange.
 Bank Subsidiaries and Affiliates
• Can be a separately incorporated bank or owned and control by bank
(partially-owned or entirely-owned subsidiaries).
MENU

Types of International Bank
Offices
(con...)
Branch Banking

Extension of parent bank; can be full-service bank.
 International Banking Facilities (IBF)
• An accounting entity as well as a legal entity of a bank to capture a segment of the
Euromarket.
• They are not subject to FDIC rules or Fed’s Required Rate Ratio.
• Deposits limited to non-residents only and size limitation.
• They are exempt from state and local tax.
• They could be U.S.-owned IBF (exempt from federal tax) or foreign-owned IBF, such
as Japanese IBF and Italian IBF.
 Edged Act Banks
• Subsidiary of U.S. bank incorporated in U.S. under section 25 of federal banking law
to engage in international banking functions and finance all types of the loans in the
world.
• They are physically located in states other than their own within the U.S. (inter-state
banking).
• If they are state chartered - called Agreement Corporation, if nationally chartered called Edged Act Bank.
MENU
Professor VAZIRI
WISHS YOU:
GOOD LUCK WITH
"Final Exam"
CFP Diploma
Finance
Diploma
Decoratv.ppt
 Exam will cover the materials
discussed in the class
Review the notes and thebook.
Have your calculater ready
Have your formulas ready
Ask questions if you are
confused.
Leave a self stamt and adressed
envelope for your grade
reporting.
MENU
ISEFI IN THE MOVE TOWARD
INTERNATIONAL CFP COUNCIL
Allemagne
Suède
France
Danemark
Espagne
Norvège
Pays-Bas
Finlande
Italie
Suisse
RoyaumeUni
Autriche
0.0 0.4 0.8 1.2 1.6 2.0
Lgnbleuv.ppt
0.0 0.4 0.8 1.2 1.6 2.0
MENU
ENDS
MENU