Question 1

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?

Accepted Answer

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.

Question 2

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.

Accepted Answer

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.

Question 3

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.

Accepted Answer

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.

Question 4

What exactly is a multinational bank?

Accepted Answer

The answer of What exactly is a multinational bank?...

Question 5

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?

Accepted Answer

The answer of If you were charged with evaluating the...

Question 6

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?

Accepted Answer

The answer of What is meant by the principle of...

Question 7

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?

Accepted Answer

The answer of What federal government regulations apply to foreign...

Question 8

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

Accepted Answer

The answer of What major problems have been encountered by...

Question 9

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

Accepted Answer

The answer of Which nonbank financial-service firms are posing a...

Question 10

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

Accepted Answer

The answer of What is political risk? Why is it...

Question 11

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

Accepted Answer

The answer of What factors appear to influence the types...

Question 12

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

Accepted Answer

The answer of How did the International Lending and Supervision...

Question 13

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

Accepted Answer

The answer of What is currency risk? What types of...

Question 14

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

Accepted Answer

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Question 15

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.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

The answer of What important principle about international banking was...

Question 18

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?

Accepted Answer

The answer of What federal government agency is the chief...

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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)

Accepted Answer

The answer of What are the essential differences between the...

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)