Multinational banking us banks overseas o mostly

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Multinational Banking Us Banks Overseas- o Mostly offshore banking Foreign Banks in the US o For regulatory and tax reasons, foreign banks book much of their US lending overseas (especially in the Caribbean) “Interstate” Banking in Europe Problems of Multinational Banking o Expanding to new country is more difficult than expanding in own country- differences in language, culture, poorer information, and fewer business relationships Offshore Banking: The Eurocurrency Market Origins of the Euromarket- o London banking market in dollars o Provided a way of doing business in US dollars- the dominant international currency What is a Eurodollar? o Eurodollar banks are financial intermediaries but they cannot themselves create dollars or execute dollar payments US Banks in the Eurodollar Market o Worried about losing business to the British to Eurodollar banks (because the industry was unregulated) American banks used their London branches to enter the Eurodollar market Shell Branches- o Less expensive way to enter Eurodollar market is through CARRIBEAN SHELL BRANCH OR BOOKING CENTER, does not conduct banking business directly, may have a lot of money in loans or deposits but the loans are made and the deposits are taken in the parent Bank’s home office. Simply a set of books o Attractive to larger banks because low tax rates of the host country
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International Banking Facilities- From Eurodollars to Eurocurrencies- o Eurocurrency- any currency other than that of the host country o Same advantages of offshore banking as it offers US banks, relatively unregulated allowing lower costs of operations The Growth of Eurocurrency Banking- The Implications of Banking Consolidation The Implications of Consolidation for the Banking Industry- Consolidation increases efficiency of banking industry – makes output a lower cost Economies of Scale- o Creates larger banks- big gains from consolidation come less from lowering operational costs than from more profitable “production” The Survival of the Fittest- Greater Efficiency of the System- The implications of consolidation for bank customers Lower cost to bank will passed down customer Stimulating Economic Growth- Lending to Small Business- consolidation increased small business lending Better Access to Banking Service- Competition- Safety and Stability-
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