Outline - International Finance Outline I Introduction A...

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International Finance Outline I. Introduction A. Elements of international financial transaction 1. Types of Financial Intermediation Indirect Finance o Banks (liability to depositors) transmitting money from Savers to Borrowers Direct Finance o Securities firms (no liability) connecting issuers (notes, bonds, equity) to investors 2. Cross-Border International Transactions a) NY Bank lending to German Co. b) NY Company issuing securities to German Investors 3. Non Cross-Border Transactions a) NY bank lending Euros to a U.S. Co b) NY bank in London (branch or sub) making Pound loan to U.K. Company (Duffy and Chung do not regard it as international) c) Japanese Co. Issuing Securities to U.S. investor in Tokyo the U.S. wants to protect people wherever they are and would extend the reach of our securities laws to even U.S. investors located abroad B. Evolution of international financial markets International Lending of Banks (1982) o Japan 11% (lending to non-residents in foreign currency)What changes between 1982 and 2002, most significant in Japan, lending in foreign currency is much more to non-residents than residents and loans in dollars in Japan has fell, reasoning: in 1982 there was a lot of regulations of the Yen (exchange controls), they lent in dollars because of lower regulation of the Yen o USA 17% (lending to non-residents in home currency) o A long-term policy in which federal reserve discourages making foreign currency loans inside the United States o UK 72% (lending to non-residents in foreign currency) o 1982 – U.S. Greatest % of International Assets, 2002 – Germany
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Off Shore Banking Centers o Functional (London) or booking (Bahamas) Move from banks as providers of capital to securities and capital markets C. Costs and benefits of international finance II. International Aspects of U.S. Securities Regulation A. Internationalization of U.S. Securities Market More Foreign Securities held More Foreign Listing on NYSE More Foreign Issues Greater U.S. Global Equity Market Cap 1. Reasons why Foreign Companies List Bonding to higher disclosure standards o Siegel disputes this because he says there is no enforcement of regulations against foreign firms B. U.S. Treatment of Foreign Issuers Much fewer causes of action against foreign v. domestic issuers a) Obstacles to Foreign Issuers in Public Offerrings No exit from ’34 Act (if more than 300 U.S. shareholders) Disclosure Costs Corporate Governance o Sarbanes-Oxley Distribution Restrictions b) April 2003 settlement for Independent Research Analysts o Separate research and investment banking o Analyst compensation cannot be based on investment banking revenues and cannot be determined by investment bankers o Analysts can’t go on roadshows o Research reports must disclose that company may seek to do business with covered firms Result: may be less research by investment banks BUT ONLY APPLIES TO U.S. FIRMS
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Outline - International Finance Outline I Introduction A...

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