QUESTION 1

In addition to banks conducting business domestically, explain FOUR (4) specific types of risks which to be encountered if decided to expand the banking business internationally.

Examples of risk:

1) Country risk 2) Currency risk 3) Transfer risk 4) Credit risk

ALL four types of risk need to be discussed.

(20 marks)

QUESTION 2

Discuss what are offshore financial centres and their characteristics. Explain the advantages and disadvantages (at least 5) of this banking system.

(25 marks)

Note: Examples of offshore financial centre:

1. Bahamas 2. Bermuda 3. British Virgin Islands 4. Cayman Islands 5. Jersey 6. Luxembourg 7. Singapore

Advantages (for examples as per below). Please provide an explanation for both advantages and disadvantages.

1. Greater privacy due to bank secrecy 2. Little or no taxation

Disadvantages

1. 1. Offshore banking can be riskier compared to onshore banking in that the bank accounts are sometimes less financially secure.