CHAPTER 6 : ISSUES IN INTERNATIONAL BANKING (ISLAMIC BANKING ISSUES…
CHAPTER 6 : ISSUES IN INTERNATIONAL BANKING
INTERNATIONAL BANKING ENVOLVEMENT
Foreign bank decides its presence in the participial capital of the bank in other country.
The presence is subsidiary
Local bank maintains its name and control in its administation
A common MNC in the form of joint venture with shareholders from two or more banks of different nationalities
MNC provide the superior technology, management know how, capital and acce.ss to finance
OFF SHORE BANK
The bank is installed in a foreigner country which to provide services not to residents of the local country
concern transaction in exchange between residents
CROSS BORDER BANKING
Contrary to the off shore banking activities, in the cross-boarder banking transaction, the banking and financial institution include themselves organically in the financial system of the country where they are located.
ASIAN FINANCIAL CRISIS
Sudden shift s in the market expectation and confidence were the key sources of the initial financial turmoil, its propagation over time and regional contagion . According to the other view, the crisis reflected structural and policy distortions in the countries of the Asian region.
Fundamental imbalance caused the currency and financial crisis in 1997. Once the crisis started, market overreaction and herding caused the plunge of exchange rates, assets prices and economic activity to be more severe that warranted by the initial week economic conditions.
THE ROOT OF THE ASIAN CRISIS
explain the multifaceted evidence on the structure of incentives under which the corporate and financial sectors operated in the region.
focus in the context of regulatory inadequacies and close relation between public and private banking
Structural distortion in the pre-crisis Asian financial
LAX SUPERVISION AND WEAK REGULATION
LOW CAPITAL ADEQUACY RATIOS
LACK OINCENTIVE-COMPATIBLE DEPOSIT INSURANCE SCHEME.
INSUFFICIENT EXPERTISE IN THE REGULATORY INSTITUTIONS
NON-MARKET CRITERIA ALLOCATION
Referred to as near-prime, non prime, and second-chance lending
Meaning that making loans to people who may have difficulty maintaining the repayment schedule
ROOTS OF THE SUBPRIME CRISIS
A number of theories as to what led to the mortgage crisis
Many experts and economies believe it came about through the combination of a number of factors in which subprime lending played a major part
An economic bubble that occurs in local or global real estate markets.
generally identified after a market correction, which occurred in the US around 2005
HISTORICALLY LOW INTEREST RATES
Mortgage rates usually set in relation to 10 years Treasury bond yields, inturn affected by federal funds rates.
HOUSING MARKET CORRECTION
Adding to the growing crisis wa the prediction by many economists and business writers in 2006 and 2007 that there would be housing market correction because of the over valuation of homes during the bubble period
RISE OF SUBPRIME LENDING
Subprime was a major factor in increase in home ownership rates and the demand for housing during the bubble years.
DECLINING RISK PREMIUMS
the risk premium required by lenders to offera subprime loan decline
ISLAMIC BANKING ISSUES
VOCABULORY OF ISLAMIC BANKING
no standardized terminology for Islamic banking products
MODUS OPERANDI OF FINANCIAL INSTRUMENTS
daily practices of implementation ,may vary from institution to institution
involve accommodation of interests of the bank's principal , the bank staff and the fun-seekers
Islamic product concept is feasible
Public education & Awareness Campaigns
Offering full-fledged undergraduates program in Islamic financing
Making Islamic financing course a part of business administration program
TRAINING OF BANKING PROFESSIONAL
Lack of qualified manpower is one of the biggest hurdles in he advancement of Islamic Banking
NATURE OF FINANCIAL INSTRUMENT
forced to adopt an outreach approach in pursuit of economic applications of funds in the marketplace
Islamic Banking model emerged as " banking under Syariah supervision "
FINANCE GAP BETWEEN ISLAMIC BANKS AND SMALL MEDIUM ENTERPRISE
A finance gap can be detected when one takes a careful look at the existing relationship between SMEs and Islamic banks.