ch6 - International Banking and Money Market 6 Chapter six...

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1 International Banking and Money Market Chapter Objective: Differentiate between international bank and domestic bank operations and examine the differences of various international banking offices. Chapter Outline International Banking Services Types of International Banking Offices Capital Adequacy Standards International Money Market 6 Chapter six
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2 International Banking Services International Banks do everything domestic banks do and: Arrange trade financing. Arrange foreign exchange. Offer hedging services for foreign currency receivables and payables through forward and option contracts. Offer investment banking services (where allowed).
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3 World’s 10 Largest Banks Citigroup U.S. Mizuho Bank/ Mizuho Corp Bank Japan HSBC Holdings U.K. Bank of America U.S. JP Morgan Chase U.S. Deutsche Bank Germany Royal Bank of Scotland Group U.K. Sumitomo Mitsui Banking Group Japan HypoVereinsbank Germany
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4 Types of International Banking Offices 1. Correspondent bank Banks located in different countries establish accounts in other bank Provides a means for a bank’s MNC clients to conduct business worldwide through his local bank or its contacts. Provides income for large banks Smaller foreign banks that want to do business ,say in the U.S., will enter into a correspondent relationship with a large U.S. bank for a fee
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5 Types of International Banking Offices 2. Representative office A small service facility staffed by parent bank personnel that is designed to assist MNC clients of the parent bank in dealings with the bank’s correspondents. No traditional credit services provided Reps looks for foreign market opportunities and serves as a liaison between parent and clients Useful in newly emerging markets Representative offices also assist with information about local business customs, and credit evaluation of the MNC’s local customers.
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6 Types of International Banking Offices 3. Foreign Branch A foreign branch bank operates like a local bank, but is legally part of the parent . Subject to both the banking regulations of home country and foreign country. Reasons for establishing a foreign branch More extensive range of services Foreign branches are not subject to Canadian reserve requirements or deposit insurance Compete with host country banks at the local level Most popular means of internationalizing bank operations
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7 Types of International Banking Offices 4. Subsidiary and Affiliate Bank A subsidiary bank is a locally incorporated bank that is either wholly owned or owned in major part by a foreign parents. An
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ch6 - International Banking and Money Market 6 Chapter six...

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