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Unit 20. International Banking

Unit 20. International Banking. I. What is the international banking?. A. Definition. International banking firms have the majority of commercial and financial transactions which cross international borders. B. Reasons of Emergence of International Banking?.

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Unit 20. International Banking

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  1. Unit 20. International Banking

  2. I. What is the international banking?

  3. A. Definition International banking firms have the majority of commercial and financial transactions which cross international borders.

  4. B. Reasons of Emergence of International Banking? The gradual relaxation of government controls in recent decades, the high cost of maintaining a large network of foreign branches, and improvements in communication technology have encouraged many international banks to offer more international services from domestic offices.

  5. C. Benefits & Problems Caused by International Banking a. Benefits: (i) One benefit to the public is greater competition in international markets, which reduce the prices of financial services. (ii) It also tied together more effectively the various national money markets into a unified international financial system, permitting a more optimal allocation of scarce resources. Funds flow freely today across national boundaries in response to difference in relative interest rates and currency values. b. Problems: Contagious effects of inflation, deflation, credit risk, foreign exchange risk, speculations, etc.

  6. II. Types of Facilities Operated by Banks Abroad

  7. A. Various Types Major banks around the world have used many vehicles to expand their international operations, such as a. international department in home offices - provide credit, access to foreign currency, other services for foreign customers; b. full-service branch offices in foreign markets; c. simple booking offices (shell branches) - on offshore islands to attract Eurocurrency accounts and avoid domestic banking regulations; d. representative offices - find new customers and give local customers a point of contact with the home office, but can not take accounts; e. foreign IBFs in US - have computerized accounts maintained for international customers and subject to minimal US regulations; f. direct equity investment in foreign banks either alone or as JV with other foreign banks.

  8. B. Factors Determining the Choice of Various Types (a) depends on the bank’s goals, size, and location. (b) depends on local government laws and regulations.

  9. III. Services Offered by International Banks

  10. Issuing L/C to facilitate international trade • Buying and selling foreign exchange on a 24-hour basis to support the imports and exports of goods and services, the making of investments, the giving of gifts, and the financing of tourism • Issuing banker’s acceptance to facilitate international trade • Accepting Eurocurrency deposits and making Eurocurrency loans • Marketing and underwriting of both domestic and Eurocurrency bonds, notes and equity shares • Securitizing loans • Other services provided by international banking - investment analysis and evaluation, credit preparation report, cash management, lease financing, equity investment, sale of insurance, mortgaging brokering services, business consultation, etc.

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