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International Banking & Money market - Coggle Diagram
International Banking
& Money market
SERVICE they provide
facilitating imports-expports
arranging for foreign exchange necessary
cross-border transactions
foreign investments
assisting hedging exchange rate risk
trade foreign exchange products
MAJOR features
types of
DEPOSITS
they acceppt
the
LOANS
and
INVESTMENTS
they make
(borrow and lend in
eurocurrency
market)
10 Largest Banks
ICBC -
China
China Construction Bank -
China
Agricultural Bank of
China
Bank of
China
Mitsubishi UFJ Financial -
Japan
BNP Paribas -
France
HSBC Holdings -
UK
Bank of America -
US
Credit Agricole -
France
Sumitomo Mitsui Financial -
Japan
REASONS for
international banking
Low marginal cost
Knowledge advantage
Home nation information
Prestige
Regulation advantage
Wholesale defensive strategy
Retail defensive strategy
Transaction costs
Growth
Risk reduction
TYPES of International
Banking Offices
Foreign branches
Subsidiary & affiliate banks
Representative Offices
Offshore banking centers
Correspondent bank
CAPITAL adequacy
standards
3 pillars
Supervisory
review process
Effective
use market discipline
Minimum
capital requirements
amount of equity capital
and other securities a bank holds
as reserves against risky assets
the goal is to
reduce the probability
of a bank failure
risky assets:
like loans that might not be repaid
Basel III
global regulation standard
announced on September 12, 2010.
to make banks safer by
strengthening capital requirements
and
improving the quality
of capital they hold
International
MONEY MARKET
Eurocurrency
A
time deposit
held in a bank located
outside the country that issued the currency
Examples:
Eurodollars:
U.S. dollars deposited in banks outside the United States.
Eurosterling:
British pounds deposited in banks outside the U.K.
Key Points:
It’s
part of an external banking system
that runs alongside the domestic system.
Originated in the
1950s and 1960s
when international trade expanded.
Eurocurrency Market
Operates at the
interbank level (bank-to-bank)
and often involves
very large transactions
(over $1 million).
LIBOR (London Interbank Offered Rate):
A widely used
reference rate for setting interest rates
on Eurocurrency loans.
Other reference rates like
SIBOR (Singapore Interbank Offered Rate)
also exist.
Why Important?
The Eurocurrency market
allows banks and businesses
to access large international loans and deposits
outside their domestic systems.
Eurocredits
Short- to medium-term loans of Eurocurrency
provided by international banks (Eurobanks)
Key Features:
Loans are not in the Eurobank’s home currency.
Because loans are large, syndicates (groups of banks) share the risk
Risk and Interest Rates:
The risk is higher than loans made to other banks.
To compensate for this risk, the interest rate on Eurocredits is higher.
Euronotes
Eurocommercial Paper
Debt-for-Equity Swaps
The ASIAN CRISIS
GLOBAL Financial Crisis:
CREDIT CRUNCH