1. Gravurev.ppt International Banking Motivations: Access to dollar and Eurocurrency deposits and international saving markets. uTasks of International Banking: Financing exports and imports Trading foreign exchange Underwriting both Euro-bonds and foreign bonds Borrowing and lending in Euro-currency market Participate and organize foreign exchange market Project financing International cash flow management & fund transfer Solicitation for local currency deposits to operate as full-service banks Serve as consultant for MNC MENU

2. Risks in International Banking 1. Commercial Risk Facing difficulties in receiving the repayments of principal and interest on due date. Lack of financial and economic information about the clients and host countries and differences in accounting disclosure practices and legal procedures. 2. Country Risk Sovereign Risk: political, jurisdictional and cultural differences. Exchange Rate Risk: shortage of foreign exchange reserves; change in repayment schedules. MENU

3. Advantages and Disadvantages of International Banking Advantages High rate of return for investment and relatively low loss ratio Ability to diversify loan portfolio. Excess demand for international loans, especially for development programs. Usually international loans are safeguarded by official and non-official insurance agencies, such as export credit insurance. Disadvantages Unfamiliar political and social environments and rapidly changing macroeconomic and financial variables. Unexpected events and regulators. Weak demand for domestic loans has relaxed standards for international loans. Only a few credit-worthy countries are available. External debt problems of many foreign international countries, especially Latin American countries and major international loan loss by many international banks. MENU

4. Types of International Bank Offices n Correspondent Banking  Two way link between banks (home and foreign bank); services offered include, but not limited to: accepting drafts, honoring L/C, and furnishing credit information. Representative Offices Representative Offices Cannot accept deposits, make loans, accept L/C or cash checks; just help and advise parent bank clients when they are doing business in host country. Agencies Relationship Agencies Relationship Like branch banking without having authority to accept deposit from the public; may accept deposits from other banks; can arrange loans, L/C and trade foreign exchange. Bank Subsidiaries and Affiliates Bank Subsidiaries and Affiliates Can be a separately incorporated bank or owned and control by bank (partially-owned or entirely-owned subsidiaries). MENU

5. Types of International Bank Offices (con...) n Branch Banking  Extension of parent bank; can be full-service bank. International Banking Facilities (IBF) International Banking Facilities (IBF) An accounting entity as well as a legal entity of a bank to capture a segment of the Euromarket. They are not subject to FDIC rules or Fed’s Required Rate Ratio. Deposits limited to non-residents only and size limitation. They are exempt from state and local tax. They could be U.S.-owned IBF (exempt from federal tax) or foreign-owned IBF, such as Japanese IBF and Italian IBF. Edged Act Banks Edged Act Banks Subsidiary of U.S. bank incorporated in U.S. under section 25 of federal banking law to engage in international banking functions and finance all types of the loans in the world. They are physically located in states other than their own within the U.S. (inter-state banking). If they are state chartered - called Agreement Corporation, if nationally chartered - called Edged Act Bank. MENU

6. Decoratv.ppt Professor VAZIRI WISHS YOU: GOOD LUCK WITH "Final Exam"  Exam will cover the materials discussed in the class  Review the notes and thebook.  Have your calculater ready  Have your formulas ready  Ask questions if you are confused.  Leave a self stamt and adressed envelope for your grade reporting. CFP Diploma Finance Diploma MENU

7. Lgnbleuv.ppt ISEFI IN THE MOVE TOWARD INTERNATIONAL CFP COUNCIL Allemagne France Espagne Pays-Bas Italie Royaume- Uni Suède Danemark Norvège Finlande Suisse Autriche MENU

8. ENDS