Please enable JavaScript.
Coggle requires JavaScript to display documents.
Types of multinational organisational form (Structure depend on (Local…
Types of multinational organisational form
Structure depend on
Local investment
Market experience
Volume of international business
Local regulatory position
Tax
Bank's overall strategic plans
Correspondent banking
Lowest level of foreign market exposure
No FDI/ physical presence
Correspondent relationship involves reciprocal agreement between domestic banks in different countries
Correspondent bank provides fee based services in foreign market on behalf of home bank & clients
Issuing bank cheques in local currency from foreign bank's account with the correspondent
Foreign currency credits issuing/ honouring LoC & providing information about foreign market conditions
Representative offices
Limited form of MNB in foreign country
Highly restricted in their activities & functions
Not authorised to conduct banking functions like deposit taking/ lending
They market MNB services & organise loans in foreign markets for their parent bank to administer
Collect information on foreign markets for MNB and clients
Rep offices are the first step in entering a foreign market
Agencies
Separate, restricted form of foreign bank branch
Operations lie between branch and rep office
Provide broader range of commercial banking services in foreign markets, able to make commercial, not consumer, loans & limited power to raise deposits
Funding from MNB parent & foreign interbank markets
Facilitate foreign trade between home & foreign countries
Through their involvement in foreign capital & money market, FX market, agencies play significant roles in management of assets of parent MNB
Branches
Higher level of commitment as foreign branch acts legally as functional part of parent's head office
Perform all functions allowed by authorities of home & host country
Mainly in wholesale lending both host country & across borders
Participate in short term lending to commercial enterprises & financing of international trade
Active in foreign capital money & foreign exchange markets & managing home country assets in foreign markets
Most common form of foreign bank expansion as the costs are less than subsidiaries
Subsidiaries
Separate legal entity from parent bank with own capital & incorporated under law of host country
Foreign subsidiaries establish to compete local retail banking
Operate more like domestic bank in foreign market & allowed to undertake broad range of banking business
Affiliates/ Joint ventures
Subsidiary must be at least 50% owned by MNB
Local regulations do not permit this, their functions are less obvious
MNB end local form depends on what local governments permits. There has been a move to force foreign banks to establish local subsidiaries when banks seek local retail banking business. Bank subsidiary is subject to local laws.