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*Chapter 2 : International Commercial Banking (a.s) (Functions (🍬…
*Chapter 2 : International Commercial Banking (a.s)
Functions
🍬 Providing facilities to effect payments on behalf of its customers
🍬 Providing facilities for saving
🍬 Providing credit facilities for individual borrowers and corporate customers
🍬 Financing government through the purchase of government securities and treasury bills (trading of securities)
🍬 Providing a wide range of other banking services
🍬 Arrange deals between their customers globally through Mudharabah and Musyarakah
Facilities Offered
❤ Trade Finance
👻 Purpose LOC
To indicate the customer has deposited the full amount due to an order with a company located in a different country
👻 Function LOC
Used by company to guarantee a manufacturer's loan
To finance the manufacture of the goods to be delivered
❤ Deposit Facilities
💌 Demand deposit
💌 Checking account
💌 Savings deposit
💌 Time deposit
💌 Negotiable Cert. of Deposit
❤ FOREX
❤ Corporate Finance
💼 Syndicated Loan
dealt with a credit facility offered simultaneously by several banks, sign in the same loan agreement and stand equally in right of repayment
💼 Euro Bond Issuance
UNSECURED, where bearer issued in markets other than the country of issue
💼 Miscellanous Banking Services
💄 Lock boxes
helpful for collecting from overseas
💄 Currency-specific CC
eliminate the cost of cross currency purchasing
Effects
👍 Positive effects
🐹 Have high perceived image that can attract clients
🐹 Diversification enables risk reduction and greater stability of earnings
🐹 Enable risk sharing
currency and interest swaps reduce customers exposure
🐹 Enhance liquidation
banks participation in FOREX markets provides liquidity
🐹 Multi banks are often not subject to same regulations as local banks (flexibility)
👎 Negative effects
🐰 Information asymmetry
🐰Moral hazard and rationing
🐰 Free rider problem during crisis
🐰Holdouts issue
🐰 Problems in international regulation
International Banking Offices
💛 Correspondent Bank
Permits the foreign bank to provide trade related and
FOREX services for its MNC customers in the foreign market without having to establish its own physical presence in the foreign market
💛 Representative Office
very limited functions
a small facility staffed by parent bank personnel that is designed to assist MNC clients of the parent bank in dealings with the bank's correspondent
a liaison between parent and clients
assist with information on local business customs and credit evaluation of mnc's local customers
💛 Foreign Branches
legally part of parent bank, not a separate entitiy
making the misr decision locally (independent)
reasons of establishing a foreign branch
Offer an extensive range of services
Take advantage on the situations where they are not subject to local reserve requirement
To compete with host country banks
Internationalizing bank operations
💛 Subsidiary and Affiliate Bank
a locally incorporated bank that is either wholly owned or owned in major part by foreign parent
engages in full banking activities
operates under banking laws of the country in which they are incorporated
separately capitalized from its parent
💛 Offshore Banking Centres
grants complete freedom from its governmental banking regulations
primary credit services provided in foreign currency
Reason for OB :-
Low or no taxes
Services provided for non resident clients
No FOREX controls
Types of banking distribution strategies
🍑 Branchless banking
delivering financial services without relying on bank branches
has many advantages :-
Very mobile
Open up to 24 hours
May withdraw or deposit a small amount
🍑 Private Banking
to private individuals who enjoy high levels of income or invest a sizable amount of assets
consisted of deposit taking and payments, discretionary asset management, brokerage, limited tax advisory services
first bank is in Venice
🍑 Retail Banking
bank performs transactions directly with end customers
include savings accounts, mortgages, personal loans, debit cards and credit cards
mostly deals with deposits and loans from corporations as opposed to individual members of the public
International Banking Offices
🐣 Correspondent Bank
🐣 Representative Office
🐣 Foreign Branches
🐣 Subsidiary and Affiliate Bank
🐣 Offshore Banking Centres