pdfLecture chapter 4 international banking

pdfLecture chapter 4 international banking - MODULE 4...

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1 MODULE 4 – Commercial Banking Introduction Commercial banking is an offshoot of the overall banking system that evolved throughout the history of financial and economic endeavors. Commercial banking began with the Goldsmith Principle and contributed to the progress of the industrial revolution. In this module, we will focus on commercial banking and how financial services are offered, from correspondent banking all the way to full-fledged multinational banks offering financial services to worldwide clientele. Furthermore, in this module we will touch upon the role the IMF plays in the operation of international commercial banking. Finally, we will discuss different financing methods and how risk is managed by commercial bankers. Objectives Upon successful completion of this module, the student should be able to: • Describe correspondent banks, representative offices, branch offices, agencies, subsidiaries, and consortium banks. • List different types of financing projects. • Identify risks posed to international commercial banking. • Describe the process of syndicated lending and its objectives. • Distinguish between internal and external processes that combined are considered operational risks. T he inevitability of globalization of financial and economic activity caused international banks to overhaul their operational orientation from the traditional banking activity of accepting deposits and loan packaging into broader financial services in line with the globalization trend. The recent shift in the operation of international commercial banks is helping multinational corporations to receive a wide variety of services from the banking systems with which they have an established financial relationship. With this in mind, the international commercial banks are fiercely competing in establishing a financial relationship with multinational corporations. This competition has been responsible for opening areas of the globe to international banks that were previously dominated by the domestic banking system. Commercial banking moved away from the practice of simply collecting individuals’ assets and issuing certificates known as “IOUs,” and then charging the asset holders a percentage for safeguarding them. The Goldsmiths used the said assets to lend to the deficit sector of society for a fee. Later on, they were compelled to pay interest to the original asset holders. This process evolved to become what commercial banking is today, that fundamentally they offer the same types of services that were offered after the Industrial Revolution by collecting funds from the surplus sector of society and lending them to the deficit sector. In the Contemporaries, commercial banking evolved to become a major player in the financial markets by providing services to the commercial sector also. In modern times, with the advent of globalization, they provide a vast variety of financial services to households and the business sector. For further information, please see Footnote #1
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This note was uploaded on 11/06/2011 for the course FIN 4634 taught by Professor Badet during the Fall '09 term at FIU.

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pdfLecture chapter 4 international banking - MODULE 4...

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