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CHAPTER 1: INTRODUCTION TO INTERNATIONAL BANKING (FACTORS OF INTERNATIONAL…

- - - - US Bank were subject to limits on their interest payment on the deposits and maintain the reserve requirements as required by Central Bank
      - this occured when US banks bagan to expand out of the country to meeet the financial requirement of the MNCs
      - starting in 1960s and lasting three decades, was mainly related to international banking transactions among developed countries
      - It was the emergence of the US as a key economic power and the growth of their foreign direct investments (FDIs) through MNCs took place
      - take advantage of cheaper financing outside the local market and to gain competitive advantage
    - - In 1990s, international banking was denominated by large banking institutions and from specifically large country such as UK, US, and Japan
      - Major trend was formed through the consolidation within national frontiers, cross-boarder M&A, and the on going shift to universal.
      - Refers to the ability to offer the full range of financial services.
      - Biggest challenge is to invest in R&D, to implement new system or technology and to be entrepreneurs friendly by the Islamic banking sector
      - It was associated with the concentration strategy applied by their branches and subsidiaries which lead to declining.
    - - it started in the 1830 and spurred by the underwriting securities activities performed in the second half of the 19th century by J.P. Morgan, Lehman Brothers and Goldman Sachs
      - these big companies sold the underwriting securities in London to European investors.
      - the expansion of bank in overseas during the first half of the 20th century was slightly limited.
      - this is due to the decline of the Bitish and its colonial empires.
      - Economic uncertainty brought about by the world wars, and the changing in political, views in many countries has resticted the rivalries coming from foreign countries in order to establish their own banking sysem
- - - - They provide their customers help from their own personnel on the spot in foreign countries.
      - These are not the offices for accepting deposits and loans.
      - Their services is to provide information about local business practice and conditions i.e. creditworthiness of local customers.
    - - An agency is like a full-fledged bank in every respect except that it does not accept deposits.
      - It deals in local money markets, FOREX markets, arrange loans, clear bank drafts/checks and channel foreign funds into financial markets.
      - -It concentrates on arranging long term loans for customers
    - - Foreign banks are operating bank like the local banks except that the director and owner tend to reside elsewhere.
      - Books are incorporated with parent bank.
      - A foreign bank is obligated to follow the regulations of both the home and host countries. It can offer more loans than a subsidiary bank and provide fast clearance of checks.
    - - A foreign subsidiary is a locally incorporated bank that happen to be either completely or partly by a foreign parent.
      - Foreign subsidiaries do all types of banking business.
    - - Consortium banks are a joint venture of larger commercial banks.
      - Primarily concerned with investments, arrangement of loans and underwrite stock and bonds.
    - - an informal linkage between banks and different coutries is set up when bank maintains correspondent accounts with each other.
      - This bank facilities international payments and collection for customers.
      - No need to maintain any office and manpower and extension of business to customers.
- - - - eg: shinhan bank is the pioneer in south korea and committed to operate globally
  - - - Eg: countries an underdeveloped institutional environment attract institutions that are used to operating in such an environment
    - - asset protection
      - delivery transformation
      - return on capital
      - industrialized operations
  - - - Global economies: to see difference between joint production and separate production. it occurs when the total costs of both joint production of all products in the product mix are less sum of the costs of producing each product independently
      - Product specific economies: it arises from the joint production of a particular product with other products. if production efficiency can be increased by adding a particular product to a given product mix, then this kind of scope exits
    - - empirical studies do not indicate that large and sophisticated banks have successfully exploited such economies via international expansion