International Banks can be characterized by the types of services they provide that distinguish them from domestic banks. Give two examples of services they provide.

International banks are distinguished form domestic banks in the type of deposits they accept and the loans and investments they make. International banks both borrow and lend in the Eurocurrency market, they are frequent members of international loan syndicates, participating with other international banks to lend large sums to MNCs needing project financing and sovereign governments needing funds for economic development. International banks also provide consulting services and advice to their clients frequently. Areas in which international banks have expertise are foreign exchange hedging strategies, interest rate and currency swap financing, and international cash management services.

Of the worlds 30 largest banks which Country leads with the most, and which Country has the second most?

Chinas leads the most in the largest banks in the world with 7 banks. While the United States leads in second with 6 large banks.

List 10 reasons for International Banking, and discuss each.

Low marginal costs: Managerial and marketing knowledge developed at home can be used abroad with low marginal costs.

Knowledge advantage: The foreign bank subsidiary can draw on the parent banks knowledge of personal contacts and credit investigations for use in that foreign market.

Home country information services: Local firms may be able to obtain from a foreign subsidiary bank operating in their country more complete trade and financial market information about the subsidiarys home country than they can obtain from their own domestic banks.

Prestige: Very large multinational banks have high perceived prestige, liquidity, and deposit safety that can be used to attract clients abroad.

Regulation advantage: Multinational banks are often not subject to the same regulations as domestic banks. There may be reduced need to publish adequate financial information, lack of required Deposit Insurance and reserve requirements on foreign currency deposits , and the absence of territorial restrictions.

Wholesale defensive strategy: Banks follow their multinational customers abroad to prevent the erosion of their clientele to foreign banks seeking to service the multinationals foreign competition.

Retail defensive strategy: Multinational banking operations help a bank prevent the erosion of its travelers check, tourist, and foreign business markets from foreign bank competition.

Transaction costs: By maintaining foreign branches and foreign currency balances, banks may reduce transaction costs and foreign exchange risks on currency conversion if government controls can be circumvented.

Growth: Growth prospects in a home nation may be limited by a market largely saturated with the services offered by domestic banks.

Risk reduction: Greater stability of earnings is possible with international diversification. Offsetting business and monetary policy cycles across nations reduces the country-specific risk a bank faces if it operates in a single nation.

List three of the top six Offshore Banking Centers listed as Major Offshore Banking Centers by the International Monetary Fund.

Bahamas, Bahrain, and the Cayman Islands.

Differentiate between Bearer Bonds, and Registered Bonds.

Bearer bonds are usually Eurobonds. Possession is evidence of ownership, the issuer does not keep any records indicating who is the current owner of a bond. Registered bonds do show evidence of ownership, the owners name is on the bond and it is also recorded by the issuer, or else the owners name is assigned to a bond serial number recorded by the issuer. When a registered bond is sold, a new bond certificate is issued with the new owners name, or the new owners name is assigned to the bond serial number.

Define a Global Bond, and list some features.

A global bond issue is a very large bond issue that would be difficult to sell in any one country or region of the world. Global bonds are fully fungible because the identical instrument trades in all markets without restriction. Global bond investors demand a competitive yield with other bond market segments. Global bonds may have a fixed or floating rate with maturities ranging from 1 to 30 years.

What are Duel Currency Bonds?

Dual currency bonds are a straight fixed-rate bond that is issued in one currency. At its maturity, the principle is repaid in another currency. The amount of the dollar principle repayment at maturity is set an inception; frequently, the amount allows for some appreciation in the exchange rate of the stronger currency.

MNC often Cross List their Shares. Give five reasons for this, and explain.

Cross listing refers to a firms having its equity shares listed on one or more foreign exchanges, in addition ot the home country stock exchange. Five reasons that MNCs cross list their shares are:

Cross-Listing provides a means for expanding the investor base for a firms stock, thus potentially increasing its demand, which may increase the market price.

Cross-Listing establishes name recognition of the company in a new capital market, thus paving the way for the firm to source new equity or debt capital from local investors as demands dictate.

Cross-Listing brings the firms name before more investor and consumer groups. Local consumers (investors) may more likely become investors in (consumers of) the companys stock (products) if the companys stock is (products are) locally available.

Cross-Listing into developed capital markets with strict securities regulations and information disclosure requirements may be seen as a signal to investors that improved corporate governance is forthcoming.

Cross-Listing may mitigate the possibility of a hostile takeover of the firm through a broader investor base created for the firms shares.

What is a Swap Bank, and what does it do?

A swap bank is a generic term to describe a financial institution that facilitates swaps between counterparties. A swap bank can be an international commercial bank, and investment bank, a merchant bank, or an independent operator. It can serve as either a swap broker or swap dealer. As a broker, the swap bank matches counterparties but does not assume any risk of the swap. As a market maker/swap dealer, the swap bank stands willing to accept either side of a currency swap, and then later lay it off, or match it with a counterparty.

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