Please enable JavaScript.

Coggle requires JavaScript to display documents.

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

- - - - Components of International Banking
        
        1.Globalization
        
        Define As :
        
        2.Liberalization
        
        Define As :
        
        3.Internationalization
        
        Define As :
- - - - European banks undertook both domestic and overseas activities - via M&A or establishment of subsidiaries by the parent company in the host countries
        
        Various Japanese & Canadian banks also developed their global banking activities in late 19th and early 20th century's
  - - - They sold the underwritten securities in London to European investors/players.
      - Expansion of banks in overseas during the first half of the 20th century was slightly limited
      - Spurred by the underwriting securities activities performed on the 2nd half of the 19th century by J.P Morgan, Lehman Brothers & Goldman Sachs
      - Economic uncertainty - world wars & changing in political views in many countries - restricted the rivalries coming from foreign countries in order to establish their own banking systems/markets
      - Started in 1830s
    - - Starting in 1960s & lasting 3 decades – mainly related to international banking transactions among developed countries
      - Emergence of the US as a key economic power & growth of their FDIs through MNCs took place. Happens when the US banks began to expand out of the country to meet the financial requirements of MNCs
      - To take advantage of cheaper financing outside the local market & to gain competitive advantage.
        US banks subject to limits on their interest payment on the deposits & maintain the reserve requirements as required by its Central Bank
      - The birth of the Eurocurrency market
        
        Eurocurrency market – wholesale foreign currency deposits & lending
        
        Took place upon the establishment of subsidiaries outside the US mainly in London
    - - Universal banking – the ability to offer the full range of financial services – one –stop centre for all related institutions
      - Universal banking – services (deposit-taking, loan-making, underwriting, consulting, leasing, hire-purchase
      - IB formed through – consolidation within national frontiers, cross-border M&A and the ongoing shift to universal banking.
      - Biggest challenges – to invest in R&D – to implement new systems/technologies & to be entrepreneurs friendly
      - By end of 1990s, IB was denominated by large banking & financial institutions specifically from the US, Japan, Germany, the UK, France, Italy & Canada
- - - - They provide their customers help from their own personnel on the spot on foreign countries
      - Their service- provide info about local business practice
    - - Is like a full-fledged bank in every respect except it does not accept deposits
      - Deals in- local money markets, FOREX, arrange loans, clear bank drafts/ checks & channel foreign funds into financial markets
    - - Informal linkage when bank maintains correspondent accounts with each other
      - Facilitate international payments & collection
    - - Locally incorporated bank that happen to be either completely/partly by a foreign parent
    - - A joint venture of larger commercial banks
      - Concerned with investment, arrangement of loans & underwrite stock and bonds
    - - Operating like the local banks except the director & owners tend to reside elsewhere
      - A foreign bank is obligated to follow the regulations of both the home and host countries
  - - - More conservative
      - Practice in smaller banks
      - Over long term - least risky due to its size & exposure
      - Customer can open any bank account, take the facility of saving, withdraw money, meet the bank manager & give feedback.
    - - More flexible & more liberal in terms of credit/loan/advance & asset valuation
      - Practice in large banks
      - Risky
      - Very convenient
      - Protect environment
  - - - Allowed bank's balance sheets to expand beyond the level that could be justified by sound risk assessment.
- - - - Reputation has a social element which is intangible& difficult to quantity. it is crucial role in social,professional & commercial interactions
        
        Can be built through constant adherence to the SOP/ through advertisment of particular qualities
  - - - However multinational banks are often not subject to the same regulations as domestic banks
        
        May be reduction in need to publish adequate financial information, lack of required deposid insurance& reserve requirement on foreign currency deposits &absence of regional restrictions
  - - - Have large pool of potential customer
        
        IB that has a strong presence in a one location might not be able to expand effectively withi thier own area, but new opening new location in other countries allows it to tap into new &unsatured markets
        
        Access to labor
  - - - The firm prefer to lacate thier business near the larger maret in order to minimize transaction costs
        
        For the joint venture kind of business are 5km radius from the bank location is considered ideal
  - - - IB need to innovative &creative
        
        Required IB to actively develop competent staff & support system
        
        SWOT analysis can be done
        
        Market segmentation is crucial
        
        Employee should encourage to continue inform,educate&provide solutions to customers
  - - - Can cause problem to their service
        
        But greater stability of earnings is possible with international diversificaton
  - - - In developing countries- must take into consideration the needs of poor group
        
        Self help + mutual help= powerful medium for the poor,s effort to socio economic upward transition
        
        The poor/needy needs to be given an equal chance
  - - - Put pressure on profit margins at home, encourage expansion & stimulate financial creativity & innovation
        
        Reinforce by the rise of securitization - allow them to match more closely the specific needs of different investors.
  - - - Example: fiscal vs monetary policies-quantitative vs qualitative approaches
        
        Occur through deregulation thar results in increase in competition among domestic/foreign banking and financial institution through restrictions in the home country-which bank will try to avoid by redirecting their business abroad
  - - - Improve data accessibility
        
        Technological changes spurred financial creativity& innovations
        
        Evalution for loan application
  - - - Example: Shinhan Bank-pioneer in S.Korea finance- comitted to operate globally
        
        Enter Canada-decided to choos Ototio's greater toronto are (GTA) because of the cultural diversity & educated /skilled workforce
        
        Ontorio's culturally diverse population quckly opened up additional opportunities for Shinhan Bank Canada
  - - - Purchasing
        
        Managerial
        
        Financial
        
        Marketing
        
        Technological
  - - - 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 of foreign bank lending
  - - - Asset protection
        
        Delivery transformation
        
        Return on capital
  - - - Then bank's international expansion could have contributed to economies of score across different business lines
        
        Increased competition which is force banks to operate more efficient or at least to maintain their competitive
        
        International operations allow banks from both developed and emerging markets to enjoy efficiency improvements