Chapter Twenty International Banking and the Future of
Chapter Twenty International Banking and the Future of Banking and Financial Services Mc. Graw-Hill/Irwin © 2008 The Mc. Graw-Hill Companies, All Rights Reserved
Types of Foreign Banking Organizations • • • Representative Offices Agency Offices Branch Offices Subsidiaries Joint Ventures Edge Act Corporations Mc. Graw-Hill/Irwin Bank Management and Financial Services, 7/e • Agreement Corporations • International Banking Facilities • Shell Branches • Export Trading Companies 20 -2 © 2008 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
Goals of International Banking Regulation • Protecting the Safety of Depositor Funds • Promote Stable Growth in Money and Credit • Foreign Exchange Controls • Restrict the Outflow of Scarce Capital • Protect Domestic Financial Institutions and Markets from Foreign Competition Mc. Graw-Hill/Irwin Bank Management and Financial Services, 7/e 20 -3 © 2008 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
Regulation of Foreign Bank Activity in the U. S. • International Banking Act of 1978 • Foreign Bank Supervision Act of 1991 • International Lending and Supervision Act of 1983 • Basel Agreement Mc. Graw-Hill/Irwin Bank Management and Financial Services, 7/e 20 -4 © 2008 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
Customer Services Supplied By Banks in International Markets • Making Foreign Currency Available • Hedging Against Foreign Currency Risk Exposure • Supplying Customers with Short and Long Term Credit and Credit Guarantees • Supplying Payment and Thrift Instruments • Underwriting Customer Note and Bond Issues in the Eurobond Market • Protecting Customers Against Interest Rate Risk • Helping Customers Market Their Products Through an Export Trading Company Mc. Graw-Hill/Irwin Bank Management and Financial Services, 7/e 20 -5 © 2008 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
Tools for Reducing Currency Risk • Forward Contracts • Currency Futures Contracts • Currency Options • Currency Swaps Mc. Graw-Hill/Irwin Bank Management and Financial Services, 7/e 20 -6 © 2008 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
Ways of Supplying Customers with Credit • Note Issuance Facilities • Eurocommercial Paper (ECP) • Depository Receipts (DR) Mc. Graw-Hill/Irwin Bank Management and Financial Services, 7/e 20 -7 © 2008 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
Payment and Thrift Instruments • Payment Services – Sight Drafts – Time Drafts • Thrift services – Tap CDs – Tranche CDs – Floating Rate Notes Mc. Graw-Hill/Irwin Bank Management and Financial Services, 7/e 20 -8 © 2008 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
Future Problems for International Banks • Growing Customer Use of Securities Markets to Raise Funds • Developing Better Methods to Estimate Risk in International Lending • Adjusting to New Market Opportunities Created By Deregulation and New International Agreements Mc. Graw-Hill/Irwin Bank Management and Financial Services, 7/e 20 -9 © 2008 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
Solutions to Troubled International Loans • They may be Restructured • They can be Sold in the Secondary Market • They can be Written Off, Either a Portion or in its Entirety Mc. Graw-Hill/Irwin Bank Management and Financial Services, 7/e 20 -10 © 2008 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
International Loan Risk Evaluation Systems • The Checklist Approach • The Delphi Method • Advanced Statistical Methods • Published Country-Risk Indicators – Euromoney Magazine – Institutional Investor Index – International Country Risk Guide Mc. Graw-Hill/Irwin Bank Management and Financial Services, 7/e 20 -11 © 2008 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
New Opportunities • Opportunities Created By NAFTA and CAFTA • Opportunities in the Expanding European Community • Opportunities in Asia as Barriers Erode Mc. Graw-Hill/Irwin Bank Management and Financial Services, 7/e 20 -12 © 2008 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
The Future of Banking and Financial Services • Convergence • Consolidation • Survival of Community Financial-Service Institutions • Reaching the Mass Media • Invasion by Industrial and Retailing Companies • The Wal-Mart Challenge Mc. Graw-Hill/Irwin Bank Management and Financial Services, 7/e 20 -13 © 2008 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
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