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Lesson 1 Global Banking and Financial Institutions.

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Presentation on theme: "Lesson 1 Global Banking and Financial Institutions."— Presentation transcript:

1 Lesson 1 Global Banking and Financial Institutions

2 Why do we have banks? Banks are important players in global financial markets. They store deposits and extend credits to households and firms. The major types of banks are: commercial banks private banks offshore banks merchant banks investment banks HSBC bank in Jordan

3 Commercial Banks A commercial bank is an institution that accepts deposits, makes business loans, and offers related services to the general public: individuals and businesses.

4 Private Banks Private banks offer personalized financial and banking services to high net worth clientele. These individuals acquire more wealth than the average person and can therefore partake in a large variety of investments. Most clients have at least $500,000 of investable assets. These bankers often address the client’s entire financial situation.

5 Offshore Banks An offshore bank is a bank that is located outside the country of residence of the depositor. Often these banks are located in low tax jurisdictions that provide financial and legal advantages. Some of these advantages include greater privacy, low or little taxation, easy access to deposits, and protection against local instability.

6 Merchant Banks Traditional merchant banks deal mainly with international finance, long-term loans for companies, and underwriting. They issue letters of credit, manage investment portfolios, transfer funds internationally, and advise companies on trading (such as mergers and acquisitions) They do not provide banking services to the general public. Today, commercial banks and investment banks engage in merchant bank activities.

7 What is an investment bank? An investment bank helps companies and governments access capital markets (such as stock markets and bond markets). While companies can access these markets directly, investment banks offer value-added services, such as Helping a company launch an IPO (initial public offering). This happens when a private company wants to get listed on the stock market and thus become public. The public can then buy shares of this company. Creating a special class of stocks that are available to specific clientele, such as insurance companies or other banks Helping a company raise debt capital (for example bonds) Insuring bonds or other financial products Investment banks also engage in proprietary trading (in-house money managers invests or trades the investment bank’s own money for its private account)


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