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CHAPTER 2 INTERNATIONAL COMMERCIAL BANK (The Effects of International…
CHAPTER 2 INTERNATIONAL COMMERCIAL BANK
INTRODUCTION
Business Checking
Deposit Account
Services Fee
Certificates od Deposit
Banker's Acceptances
Trade Finance
Project Finance/ Joint Finance
Payroll
Foreign Exchange
Lock Boxes for Collecting Payment
General Corporate Finance
Transferring Fund/Debt
Translation Business
Commercial bank do not create money
Intermediaries that move money from the capital markets to business and institution.
Worldwide benchmark/indicator of economy health and business trends
Affin Bank Berhad
Alliance Bank Malysia Berhad
AmBank(M) Berhad
BNP Paribas Malaysia Berhad
5.Bangkok Bank Berhad
Bank of America Malaysia Berhad
7.Bank of China (Malaysia) Berhad
Bank of Tokyo- Mitsubishi UFJ (malaysia) Berhad
CIMB Bank Berhad
Citibank Berhad
International Retail Banking, Branchless Banking and Private Banking
Relates to financial intermediaries that bid for time deposits and make loan in offshore market
unregulated market
wholesale segment of lending and deposit activity
substitutes for domestic banking offices
types of international banking offices
correspondent bank
lowest possible of banking exposure to the foreign market
foreign bank provide trade-related and FOREX services for MNC customer in the foreign market without establish it own physical presence
smaller foreign bank that want to do business in US need to enter into a correspondent relationship with US bank for a fee
large bank provides international trade facilities and FOREX services
Representative Office (Rep Office)
establishes a physical presence in the foreign market
has very limited functions
designed to assist MNC client of the parent bank in dealings with correspondent's bank
information about local business practices
economic information
credit evaluation of customers
not allowed to offer traditional banking services
looks for foreign market opportunities and services as a liaison between parent and client
suitable and useful in newly emerging markets with low budget and easily closed down, making them as a useful vehicle for exploring a new market
Foreign Branches
operates like a local bank but it legally part of the parent bank
not a separate entity
subject to banking regulation of home country and foreign country
more independent and making most decision locally as compared to rep office
reasons establishes a foreign branch
take advantages on the situations not subject to local reserve requirements or deposit insurance
to offer more extensive range of services
to compete with host country banks at the local level
to internationalizing bank operations
Subsidiary and Affiliate Bank
locally incorporated bank
wholly owned or owned in major part by a foreign parent
engages in full banking activities as permitted by host country regulations
one of the partially owned, but not controlled by its foreign parent
established as a new entity of organization or through the M&A activity of an existing bank
operates under the banking laws of the country in which they are incorporated
allowed to underwrite securities
Offshore Banking Centers
function of offshore banking centers with lower spreads
unregulated institutions (low reserve requirement and no deposit insurance)
not subject to interest rate ceilings
can take advantage of low tax location
high degree of competitiveness
low margins
low overheads
no pressure from domestic government
banking system is organized to permit external accounts beyond the normal scope of local economic activity
host country grants complete freedom from its governmental banking regulations
the primary activities are to seek deposits and grants loans in currencies other than the currency of the host/local government
reasons for offshore banks
low/no taxes
services provided for non-resident clients
few or no FOREX controls
legal regime that upholds bank secrecy
Types of banking distributions strategy
Branchless Banking
a distribution channel strategy used for delivering financial services without relying on bank branches
can also be used as a separate channel strategy that entirely forgoes bank branches
examples of branchless banking
internet
Automated Teller Machines (ATM)
POS devices
EFTPOS devices
mobile phones ( successfully functioned worldwide)
very mobile (users and agents)
open up to 24 hours a day, depends on agents
very small fees for agents
may withdraw or deposit a small amount
no need for a bank account, only a mobile phone number
almost no paperwork
generate low income for thousands of agents
very small bank overhead
suitable for many people with low income and low literacy
reduced transportation cost and time
stationary bank branches
mobile bank branches
bank agents
online banking
mobile banking
each of medium serves to deliver a set of banking services and are part of distribution channels that may be used to form the overall distribution channel strategy
seperately
in conjunction
Private Banking
it is banking, investment, acquisition and other financial services provided to private individuals who enjoy high levels income
term 'private'
refers to customer service rendered on a more personal basis than in mass-market retail banking
not refer to a private bank, which is non-incorporated banking institution
forms an important, high level and more exclusive subset of wealth management
largely consisted of
banking services
discretionary asset management
brokerage
limited tax advisory services
some basic concierge-type services, offered by a single designated relationship manager
known as private to stand out from the retail banking and savings banks aimed at the new middle class
internationalization, globalization and liberalization have required the needs of technological developments to ensure private banks can innovate their value proposition and look for new market segments
technological developments have made sure that online banks can offer banking services without an extensive network of offices
Retail Banking
when a bank performs transactions directly with end-customers rather than large corporations/business entities or other banks
services offered
saving accounts
mortgages
personal loans
debit cards
credit cards
term used to distinguish these banking services from
investment banking
commercial banking
wholesale banking
may also be used to refer to a department/division that dealing with retail customers
the new roles of commercial bank can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large business
typical services
transactional account
current account
savings account
debit card
ATM card
credit card
traveller's cheque
mortgage
home equity loan
personal loan
certificates of deposit/term deposits
Facilities Offered by International Commercial Banks
TRADE FINANCE
:check:
Commercial banks doing international business are also called investment banks because they finance trade between companies and customers located in different countries.
:check: Done by issuing Letter of Credit that indicate has deposited the full amount due on an order with the company located at different country
:check: Without Locs, companies would face considerable expenses in investigate their foreign customers to make sure they are legitimate and creditworthy
DEPOSIT FACILITIES
:check: This services offered include deposit and loan facilities
:check:One of facilities is demand deposit
:check: Other facilities is under the deposit facility called checking account
:check: Banks do also offer time deposit
:check:Another deposit facility is called negotiable certificate of deposit
FOREIGN EXCHANGE
:check: The main participants in Forex are the larger international banks
:check: Trade between foreign exchange dealers can be very large,involving hundreds of millions of dollars
:check: Centrals banks plays a major role in the Forex markets
CORPORATE FINANCE
:check:Corporate finance involves borrowing in the Eurocurrency market,participating in the international loan syndicate by lending to MNCs and participating in the underwriting of Eurobons and foreign bond issues.
:check:Provide consuktancy and advisory on managing risk/hedging strategies, interest rates and currency swap financing and international casg management services.
The Effects of International Foreign Commercial Banks
Managerial & marketing advantage
Knowledge advantage
Home nation information services
Large multinational banks - reputation/image/prestige) can attract potential clients
Regulatory advantage
Foreign market may offer opportunities
risk reduction and greater stability
Diverse choice
Advantage through international transaction
:explode: risk sharing
:explode: liquidity
:explode: information
Negative effects of international transaction
Information assymmetry
Moral hazard
Free rider problems in resolution of crises
Some rely much more on equity than deposits
Problems regarding international regulations in certain countries
Sources of Fund
Services
Offers
List of Commercial Bank in Malaysia