Exam 24: International Banking

A major money-center bank in the United States wishes to expand its presence in the unfolding European Community, where it currently services corporate customers but has no physical facilities.Based on the discussion in this chapter what initial forms of facilities would you recommend to its management and why? What special problems can you anticipate given recent announcements by the European Community regarding changes in its monetary system and in its regulation of outside financial-service suppliers?

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Question 1

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The bank could begin by supplementing its home-based calling effort with representative offices in targeted European cities. It could then convert the most successful/important ones into full-service branch offices.
The conversion to the Euro as a currency should eventually make the bank's FX and loan servicing areas easier to operate. Also, the bank may be able to capitalize on the Euro-denominated financing markets.

What are the principal services offered by the international banking industry? Please make a list of these services and briefly define what each is about.

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Multinational banks offer a diverse range of financial services to their customers. They issue letters of credit and bankers acceptances to help customers bridge the gap between cash expenditures and cash receipts and reduce the risks associated with international trade and currency trading. Multinational banks buy and sell currencies (both spot and forward) for their customers, offer currency and interest-rate tools, accept transactions and time deposits (including those traded in the Eurocurrency markets), extend Eurocurrency loans, underwrite new security issues (both debt and equity), securitize loans, lease capital assets, sell insurance and advise their clients concerning foreign marketing opportunities.

Should the activities of foreign banks be regulated when they enter any particular domestic economy? Why or why not? What could be gained by the nation being entered and what dangers might follow? How would you propose to deal with the dangers or risks involved? Please explain the reasons behind your recommendations.

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The activities of foreign banks should be regulated, so that their practices are in concert with the domestic industry and so that no unfair advantage is possessed or gained. Also, if deposit-taking were allowed, the country's central bank would want to maintain influence and regulatory control over the money-supply aspects of deposits, as well as to protect local savers.

What exactly is a multinational bank?

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Question 4

If you were charged with evaluating the country risk associated with the following nations what factors would you want to examine? a. Brazil b. Korea c. China d. Japan e. Argentina Carefully explain why each factor that you specify relates to the risk exposure that an international bank making loans in each nation faces. What recent developments in each of the above nations suggest that a new assessment of country risk may be in order?

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Question 5

What is meant by the principle of mutual nondiscrimination? What problems does this principle pose for regulators? What advantages does it have over other regulatory approaches?

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Question 6

What federal government regulations apply to foreign banks operating in the United States today? Why did Congress pass laws to regulate foreign bank activity in the U. S? What is the danger if laws of this type are made too restrictive?

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Question 7

What major problems have been encountered by the international banking community in recent years? How have these problems been dealt with?

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Question 8

Which nonbank financial-service firms are posing a strong competitive challenge to international banking today?

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Question 9

What is political risk? Why is it important in international banking?

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Question 10

What factors appear to influence the types of services an international banking firm chooses to offer its customers?

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Question 11

How did the International Lending and Supervision Act affect international banks? How about the Basle Agreement?

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Question 12

What is currency risk? What types of currency risk exposure are of special concern to international bankers?

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Question 13

Please explain why foreign banks have entered the United States in considerable numbers in recent years.

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Question 14

Most Eurobonds are sold on a "best efforts" basis in which the borrower assumes the market risk if the security issue fails to sell and receives no substantial funds until the whole issue is sold.

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Question 15

Despite the growing impact of the Japanese in international markets no Eurobonds are denominated in yen.

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Question 16

What important principle about international banking was revealed by the global banking crisis of the 1990s?

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Question 17

What federal government agency is the chief regulator of foreign banks operating in the United States? Why do you think Congress picked this particular agency to play a leadership role in foreign bank regulation inside the United States?

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Question 18

Syndicated Eurocurrency credits are considered a fast method of raising loanable funds and spreading risk for international banks.

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Question 19

What are the essential differences between the following types of banking offices or facilities: International banking departments::Representative offices Edge Act and Agreement corporations::Shell branches Full-service branches::International banking facilities (IBFs)

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Question 20

Showing 1 - 20 of 21

Exam 24: International Banking

What are the principal services offered by the international banking industry? Please make a list of these services and briefly define what each is about.

What exactly is a multinational bank?

What is meant by the principle of mutual nondiscrimination? What problems does this principle pose for regulators? What advantages does it have over other regulatory approaches?

What federal government regulations apply to foreign banks operating in the United States today? Why did Congress pass laws to regulate foreign bank activity in the U. S? What is the danger if laws of this type are made too restrictive?

What major problems have been encountered by the international banking community in recent years? How have these problems been dealt with?

Which nonbank financial-service firms are posing a strong competitive challenge to international banking today?

What is political risk? Why is it important in international banking?

What factors appear to influence the types of services an international banking firm chooses to offer its customers?

How did the International Lending and Supervision Act affect international banks? How about the Basle Agreement?

What is currency risk? What types of currency risk exposure are of special concern to international bankers?

Please explain why foreign banks have entered the United States in considerable numbers in recent years.

Most Eurobonds are sold on a "best efforts" basis in which the borrower assumes the market risk if the security issue fails to sell and receives no substantial funds until the whole issue is sold.

Despite the growing impact of the Japanese in international markets no Eurobonds are denominated in yen.

What important principle about international banking was revealed by the global banking crisis of the 1990s?

What federal government agency is the chief regulator of foreign banks operating in the United States? Why do you think Congress picked this particular agency to play a leadership role in foreign bank regulation inside the United States?

Syndicated Eurocurrency credits are considered a fast method of raising loanable funds and spreading risk for international banks.

What are the essential differences between the following types of banking offices or facilities: International banking departments::Representative offices Edge Act and Agreement corporations::Shell branches Full-service branches::International banking facilities (IBFs)

Functions and Roles of the Financial System in the Global Economy

Financial Assets, Money, Financial Transactions, and Financial Institutions

The Financial Information Marketplace

The Future of the Financial System and the Money and Capital Markets

The Determinants of Interest Rates: Competing Ideas

Measuring and Calculating Interest Rates and Financial Asset Prices

Inflation and Deflation, Yield Curves, and Duration: Impact on Interest Rates and Asset Prices

The Risk Structure of Interest Rates: Defaults, Prepayments, Taxes, and Other Rate-Determining Factors

Interest-Rate Forecasting and Hedging: Swaps, Financial Futures, and Options

Introduction to the Money Market and the Roles Played by Governments and Security Dealers

Commercial Banks, Major Corporations, and Federal Credit Agencies in the Money Market

Roles and Services of the Federal Reserve and Other Central Banks Around the World

The Tools and Goals of Central Bank Monetary Policy

The Commercial Banking Industry: Structure, Products, and Management

Nonbank Thrift Institutions: Savings and Loans, Savings Banks, Credit Unions, and Money Market Funds

Mutual Funds, Insurance Companies, Investment Banks, and Other Financial Firms

Regulation of the Financial Institutions Sector

Federal, State, and Local Governments Operating in the Financial Markets

Business Borrowing: Corporate Bonds, Asset-Backed Securities, Bank Loans, and Other Forms of Business Debt

The Market for Corporate

Consumer Lending and Borrowing

The Residential Mortgage Market Stock

International Transactions and Currency Values

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