Lecture Multinational financial management: Lecture 32 - Dr. Umara Noreen

After completing this chapter, students will be able to: International banking services, reasons for international banking, types of international banking offices, capital adequacy standards, international money market, international debt crisis.

International Banking  Lecture 32 and Money Market INTERNATIONAL FINANCIAL MANAGEMENT Chapter Objective: This chapter serves to begin our discussion of world  financial markets and institutions.  Second Edition EUN / RESNICK Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­1 Outline  International Banking Services  The World’s Largest Banks Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­2 Outline International Banking Services  Reasons for International Banking  Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­3 Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­4 Outline International Banking Services  Reasons for International Banking  Types of International Banking Offices         Correspondent Bank Representative Offices Foreign Branches Subsidiary and Affiliate Banks Edge Act Banks Offshore Banking centers International Banking Facilities Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­5 Outline International Banking Services  Reasons for International Banking  Types of International Banking Offices  Capital Adequacy Standards  Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­6 Outline      International Banking Services Reasons for International Banking Types of International Banking Offices Capital Adequacy Standards International Money Market       Eurocurrency Markets Eurocredits Forward Rate Agreements Euronotes Euro­Medium­Term Notes Eurocommercial Paper Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­7 Outline       International Banking Services Reasons for International Banking Types of International Banking Offices Capital Adequacy Standards International Money Market International Debt Crisis     History Debt­for­Equity Swaps The Solution: Brady Bonds The Asian Crisis Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­8 International Banking Services  International Banks do everything domestic banks  do and:     Arrange trade financing Arrange foreign exchange Offer hedging services for foreign currency receivables  and payables through forward and option contracts Offer investment banking services (where allowed) Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­9 The World’s 10 Largest Banks Bank of America U.S Citigroup U.S HSBC Holdings U.K Crédit Agricole Group France Chase Manhattan U.S Industrial & Commercial Bank of China China UBS Switzerland Deutsche Bank Germany Wells Fargo U.S Bank One U.S Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­10 Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­46 Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­47 Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­48 Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­49 Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­50 Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­51 Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­52 Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­53 Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­54 Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­55 Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­56 Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­57 Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­58 Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­59 Irwin/McGraw­Hill                                      Copyright © 2001 by The McGraw­Hill Companies, Inc.  All rights reserved.  6­60 ... Local firms in a foreign market may be able to obtain  more complete information on trade and? ?financial? ? markets in the? ?multinational? ?bank’s home nation than is  obtainable from foreign domestic banks Irwin/McGraw­Hill                                    ... Low Marginal Costs  Knowledge Advantage  Home Nation Information Services  Prestige   Very large? ?multinational? ?banks have high perceived  prestige, which can be attractive to new clients Irwin/McGraw­Hill                                    ...  Knowledge Advantage  Home Nation Information Services  Prestige  Regulatory Advantage   Multinational? ?banks are often not subject to the same  regulations as domestic banks Irwin/McGraw­Hill