Global Banking Scenario Dr Manish Dadhich Introduction The
Global Banking Scenario Dr. Manish Dadhich
Introduction • The various international activities of banks have evolved fairly & rapidly during the past three decades or so. • New activities were initiated by international banks in the 1970 s and 1980 s. These, included Eurocurrency trading, syndicated Eurobond lending, and merchant banking.
Global Banking • In the late 1980 s and early 1990 s, international banks entered into a number of innovative activities including derivatives trading, global money market-making, loan portfolio management, and private banking. Banks have added new operations in these innovative areas including creation of secondary markets in currency and interest rate swaps and global financial services for MNCs, including bond repurchase agreements, Euro-commercial paper, and derivatives for hedging a variety of prices.
International banking operations • International banks also can be characterized by the way they are structured to do international banking operations. • They may do a full line of banking, i. e. , take deposits, make loans, do foreign exchange trading, in the form of subsidiaries or branches. • They may operate agencies in foreign countries. Agencies cannot do a full line of banking because they cannot take deposits. • They can, however, maintain credit balances by borrowing fund and capital markets or by being funded by the parent banking firms
International banking operations • International banks usually have representative offices in foreign countries and some operate security affiliates, whollyowned subsidiaries, which perform brokerage, underwriting, and other investment banking functions.
The Bank for International Settlements (BIS) • One institution does make an attempt to regulate international banking on a global basis. • This is the Bank for International Settlements (BIS), located in Basle, Switzerland. • The BIS was established in 1930 by the central banks of Belgium, France, Germany, Italy, Japan, and the United Kingdom. • It has been referred to as a central bank for central bankers. • The BIS serves its member banks by facilitating international banking agreements. • The recent Basle Agreement on capital adequacy for banks worldwide is an example of such an agreement. • It also serves to protect the integrity of its members' currencies by supporting them with currency market
International banks are essentially organized to provide six major functions: 1. 2. 3. 4. 5. International trade finance, foreign exchange operations, Eurocurrency operations, investment banking, and global custody and settlement.
The World Bank group • Originated as a result of the Bretton Woods Conferences of 1944, is one of the world’s largest sources of development assistance and it has extended assistance to more than 100 developing economies, bringing a mix of finance and ideas to improve living standards and eliminate the worst forms of poverty.
The World Bank group • The World Bank group consists of five institutions. • The World Bank Group consists of five closely associated institutions, each institution playing a distinct role in the mission to fight poverty and improve living standards for people in the developing world. • The term World Bank refers specifically to the five following banks:
Cont’d • The International Bank for Reconstruction and Development (IBRD) • The International Development Association (IDA). • The International Finance Corporation (IFC). • The Multilateral Investment Guarantee Agency (MICA). • The International Centre for Settlement of Investment Disputes (ICSID)
New Development Bank • New Development Bank – (NDB): This was formerly referred to as the BRICS Development Bank. • It is a multilateral development bank established by BRICS countries - Brazil, Russia, India, China and South Africa. • The bank supports public or private Projects through loans, guarantees, equity participation and other financial instruments. • NDB also co-operates with international organizations and other financial entities and provide technical assistance for projects to be supported by the Bank. • Established in July 2015 the bank is headquartered in Shanghai, China.
Conclusion • To most consumers who use international banking services, selling or redeeming international travelers cheques may be the only direct contact they ever make with an international bank. • However, the role of the international bank in these major functions is far more significant than just what it does for the average retail customer.
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