CHAPTER TWENTY International Banking Service Options The purpose of this chapter is to learn what services international banks offer their customers and to discover the options a bank manager has under law and regulation to organize a multinational bank.

McGraw-Hill/Irwin Bank Management and Financial Services, 6/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Types of Foreign Banking Organizations Representative Offices Agency Offices Branch Offices Joint Ventures Edge Act Corporations Agreement Corporations International Banking Facilities Shell Branches Export Trading Companies

McGraw-Hill/Irwin Bank Management and Financial Services, 6/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Goals of International Banking Regulation Protecting the Safety of Depositor Funds Promote Stable Growth in Money and Credit Foreign Exchange Controls Restrict the Outflow of Scarce Capital Protect Domestic Financial Institutions and Markets from Foreign Competition

McGraw-Hill/Irwin Bank Management and Financial Services, 6/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Regulation of Foreign Bank Activity in the U.S. International Banking Act of 1978 Foreign Bank Supervision Act of 1991 International Lending and Supervision Act of 1983 Basle Agreement

McGraw-Hill/Irwin Bank Management and Financial Services, 6/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Customer Services Supplied By Banks in International Markets Making Foreign Currency Available Hedging Against Foreign Currency Risk Exposure Supplying Customers with Short and Long Term Credit and Credit Guarantees Supplying Payment and Thrift Instruments Underwriting Customer Note and Bond Issues in the Eurobond Market Protecting Customers Against Interest Rate Risk Helping Customers Market Their Products Through an Export Trading Company

McGraw-Hill/Irwin Bank Management and Financial Services, 6/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Tools for Reducing Currency Risk Forward Contracts Currency Futures Contracts Currency Options Currency Swaps

McGraw-Hill/Irwin Bank Management and Financial Services, 6/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Ways of Supplying Customers with Credit Note Issuance Facilities Eurocommercial Paper (ECP) American Depository Receipt (ADR)

McGraw-Hill/Irwin Bank Management and Financial Services, 6/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Future Problems for International Banks Growing Customer Use of Securities Markets to Raise Funds Developing Better Methods to Estimate Risk in International Lending Adjusting to New Market Opportunities Created By Deregulation and New International Agreements Opportunities Created By NAFTA Opportunities Created in the EU and Eastern Europe Opportunities Created in Asia