Presentation on theme: "International Banking Concepts and examples World’s Biggest Banks (assets in billion of dollars:1998) 1 Bank of Tokyo-Mitsubishi, Japan, 85,372 2 HSBC."— Presentation transcript:
International Banking Concepts and examples
World’s Biggest Banks (assets in billion of dollars:1998) 1 Bank of Tokyo-Mitsubishi, Japan, 85,372 2 HSBC Holdings, UK, 76,357 3 Lloyds TSB Group, UK, 54,453 4 Citicorp, US, 53,822 5 Sumitomo Bank, Japan, 41,944 6 BankAmerica, US, 41,344 7 Dai-Ichi Kangyo Bank, Japan, 41,131 8 Chase Manhattan, US, 40,363 9 Fuji Bank, Japan, 38,440 10 Sanwa Bank, Japan, 37,990 11 NationsBank, US 34,625 12 Barclays, UK 32,426 13 Industrial Bank of Japan 30,077 14 Deutsche Bank Germany 29,142 15 Union Bank of Switzerland 25,764 16 Wells Fargo Bank, US 25,579 17 ABN Amro Holding, Netherlands 25,168 18 First Union, US 23,617 19 Hang Seng Bank, Hong Kong 23,088 20 National Westminster Bank, UK 22,430 21 Credit Suisse Group, Switzerland 22,361 22 Abbey National, UK 22,144 23 Sakura Bank,Japan 21,229 24 National Australia Bank 20,532 25 Norwest, US 20,074... 40 Royal Bank of Canada 13,430
World's financial centers: London Tokyo New York Paris, Frankfurt, Zurich, Amsterdam, etc.
Foreign Exchange Trading Income of Selected Banks ( in millions of US$ ) Company19771987199719981999 Bank of New YorkNANA109126137 Chase Manhattan55385790936807 Citicorp684531,4861,6281,569 Credit Suisse First BostonNANA69997897 Deutsche BankNANA1,040636807 Mellon Financial Corp68118165173 Morgan (J.P.) & Co.40251493781777 Republic National Bank53998120141 State Street Bank221159177209
Reasons for international banking: International trade and investment Low marginal costs Arbitrage regulations Defensive strategies Limited domestic market Risk reduction
A Primer on Import/Export Payments ImporterExporter 1. Exporter ships the goods 2. Importer pays after receiving the goods Importer’s preference
A Primer on Import/Export Payments ImporterExporter 2. Exporter ships the goods after payment 1. Importer pays the goods Exporter’s preference
The Bank as an Export/Import Intermediary ImporterExporterBank 1. Importer obtains bank’s permission to pay on importer’s behalf 2. Bank promises exporter to pay on behalf of importer 3. Exporter ships to the bank 4. Bank pays exporter 5. Bank releases merchandise to importer 6. Importer pays bank
A Typical Trade Transaction ImporterExporter Bank I Bank X 1. Importer orders goods 2. Exporter agrees to fill order 3. Importer arranges L/C with bank I 4. Bank I sends L/C to bank X 6.. Exporter ships goods 5. Bank X advises exporter of L/C 7. Exporter presents shipping documents to bank X 8. Bank X presents shipping documents to bank I 9. Bank I accepts documents and promises to pay within 60 days Public investor 10. Bank X sells acceptance documents 11. Payment 12. Payment 13. Investor presents documents and gets paid
Types of international banking offices: Types of international banking offices: Correspondent banks Representative office Foreign branch Subsidiaries Affiliates Offshore banking centers
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Offshore banks: operate outside the jurisdiction of most industrialized countries are subject to very few regulations are located in tax havens
Tax havens countries
Tax avoidance: Exemplification
Tax avoidance: Benefits Lincoln belge gets a tax deduction Old Abe gets a tax free interest income