FACTOR OF INTERNATIONAL BANKING GROWTH :!: (GROUP 1 ♥️ (2. Low Marginal…
FACTOR OF INTERNATIONAL BANKING GROWTH :!:
17. Conditions in Host Countries
Subsidiary bank is a foreign bank that is incorporated in the host country by considered to be owned by a foreign parent bank which need to operate under the host country`s regulation.
Bank expand internationally to find optimal balance between return and risk
macroeconomics and financial stability in host countries is importance to forces to extent and form a foreign bank lending
Influence the foreign bank`s decision to establish a branch or a subsidiary
19. Efficiency Consideration
The bank`s international expansion could have contributed to economies of scope across different business lines
Increased competition which is force banks to operate more efficient or at least to maintain their competitive position
2 types of economies that have a connection with the scope of economies:
:lock: Global economies of scope
:lock:Product-specific economies of scope
International operations allow banks from both developed and emerging markets to enjoy efficiency improvements
18. Comparative advantage
Countries with an underdeveloped institutional environment attract institutions that are used to operate in such environment
From bank`s perspective which is there non-economic factors help them to choose the location of their affiliates.
Cultural proximity is foster cross-border bank
4 main areas:
:pencil2:Return on capital
Improved the impact of economic integration
Advances in telecommunications, It, financial theory for bank products
Improve data accessibility on borrower, guarantor air collateral
Local commercial banks embedded as part of global financial institutions
Offset the cost of doing business in locations far from the head office
Credit scoring tools for loan application
In Malaysia, a well known method is FICO score
Makes underwriting much more transparents to third parties
Forms of culture, belief, socioeconomic, ethnic, gender
Advantages of growing diversity
Ontrio's culturally diverse population quickly
drives economic growth
recruits more qualified workforce
avoids employee turnover costs
Economic of scale
Sources of economies of scale:
Refers to how a firm can focus on reducing the average per unit cost of its products/services by increasing the scale of production for a single unit of products
Kinds of economies:
Product specific economies of scale
Overall economies of scale
Reputation has a social element - intangible and difficult to quantify - crucial role in social, professional & commercial interactions
Can be built through constant adherence to the SOP/ through advertisement of particular activities
Multinational banks - have high perceived prestige, liquidity & deposit safety.
Have larger pool of potential customer
Aim for profit
Access to labour
IB that has a strong presence in one location might not be able to expand effectively within their own area, but opening new locations in other countries allows it to tap into new & unsaturated markets.
Multinational banks are often not subject to the same regulations as domestic banks
Reduction may be needed to publish adequate financial information, lack of required deposit insurance & reserve requirements on foreign currency deposits & absence of regional restrictions.
The government uses its own discretion, outside formalised legislation to influence banking sector operations/outcomes.
ECONOMIC DEVELOPMENT :<3:
:pencil2: In developing countries must take into consideration the poor group.
:pencil2: The profit-maximizing strategy behind the bank's international activities is affected by economic developments and regulatory environment in the home country.
:pencil2: self-help supplement with mutual help can be a powerful medium for the poor's effort to socio-economic upward transition
:pencil2: The poor needs to be given an equal chance.
COMPETITIVE MARKET :<3:
:fire: Put pressure on profit margins at home.
:fire: Reinforce by the rise of securitization.
:fire: Related to the degree of development of financial systems.
GOVERNMENT POLICIES :<3:
:tada: Occur through deregulation that results in increase in competition among domestic or foreign banking.
:tada: Example : Fiscal :green_cross: monetary policies
:tada: In some case, government policies have also acted as either a push or pull factor for international banking.
Restriction to foreign bank entry gradually eased by bilateral or regional trade and investment agreements :
Regional barriers which is tariff and no tariff are reduce and eliminated among the members
This will contribute towards growth because of benefits in term of economics of scale, cost effective or productive and increase in demand :
2. Low Marginal Cost
Marginal and marketing knowledge at home country can be used abroad with low marginal costs
SWOT analysis can be done to reflect the SWOT of the international banking and its counterparts
Find out more strengths and opportunities in the new places abroad
By proper management and techniques to make the bank go internationally that result in low marginal cost will influence the international banking growth
3. Knowledge Advantage
• Knowledge is a major driver of customer service, creativity
and innovation, and revenue growth.
• Customer satisfaction can be maintained by engaging with the local partners through collaboration of skills and knowledge, as this will deliver better products and services
• Hybrid products and services can be introduced in order to cater the demand from local and foreign markets.
4. Information Services
Obtain more complete information on trade and financial markets.
IT plays a vital role in the growth of an organization.
Technology infrastructure of international banks need to be continuously upgraded.
GROUP 3 :star:
Transaction Costs :check:
By maintaining foreign branches and foreign currency balances
:check: Reduce transaction cost & foreign exchange risks
While MMCs can take advantage of cheap labour
:check: Subject to higher tax
:check: Pay more other things
To increase return, they prefer to locate near the larger market
Risk Reduction :fire:
:warning: Any corporation that do business abroad are always at risk of facing unexpected changes
:warning: Greater stability of earning is possible with international diversification
:warning: Risk can be categorized into six components
:check: Legal risk
:check: operational risk
:check: Country risk
:check: Reputational risk
:check: Credit risk
:check: Market risk
:check: Liquidity risk
:star:International banks are required to actively develop competent staff & support system
:star: SWOT analysis develops what your competitors do not have or not offer could be the critical info.
:star:Identify and highlight the strengths that the banks have and increase capability in delivering the particular product/service
:star:Employees should be encouraged to continually inform, educate and provide solutions to customer.
quantitative :green_cross: qualitative approaches