Download International Banking

Organization of International Banks
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International banks provide services to
those engaged in international trade and
investment: risk-sharing, liquidity,
information.
Like domestic banks, international banks
accept deposits and lend.
International banks lower transactions costs
and lower information costs.
Copyright © 2002 Pearson Education, Inc.
Slide 16-1
Overseas Organization of U.S. Banks
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Some banks operate wholly owned
branches around the world.
Edge Act corporations can perform only
international banking services.
U.S. banks can own a controlling interest in
foreign financial service companies.
International banking facilities (IBFs) can
do business only with foreigners.
Copyright © 2002 Pearson Education, Inc.
Slide 16-2
Organization of Foreign Banks in the
United States
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An agency office can transfer funds from
abroad and make loans in the United States.
A foreign bank branch is a full-service
bank with the name of the foreign bank.
A subsidiary U.S. bank is treated as a U.S.
bank but need not have the foreign bank
name.
Copyright © 2002 Pearson Education, Inc.
Slide 16-3
Managing Exchange Rate Risk
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International banks are exposed to exchange
rate risk in their foreign transactions.
Banks can avoid this risk by matching the
denomination of assets and liabilities.
Banks can hedge against exchange rate risk
by using financial futures or options.
Copyright © 2002 Pearson Education, Inc.
Slide 16-4
Services Provided by International
Banks
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Bank trading increases liquidity and efficiency of
markets.
Banks trade to reduce customer’s costs for
transactions and their own exchange rate risk.
Banks also arrange currency swaps.
Banks help firms move funds from country to
country.
Banks provide bankers’ acceptances.
Copyright © 2002 Pearson Education, Inc.
Slide 16-5
Figure 16.1 Information Services and
Bankers’ Acceptances
Copyright © 2002 Pearson Education, Inc.
Slide 16-6
Figure 16.2
International Banking Services
Copyright © 2002 Pearson Education, Inc.
Slide 16-7
The Rise of Euromarkets
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Before World War II, the pound served as the
international transaction currency.
A Eurodollar is a dollar-denominated deposit in a
bank outside of the U.S.
British banks, trying to avoid rules on the use of
pounds, created the Eurodollar market…LIBOR
Much of international banking is done in banking
centers called Euromarkets.
Copyright © 2002 Pearson Education, Inc.
Slide 16-8