INTERNATIONAL BANKS

PREYANTH T K
 International Banking Services
Aninternational bankis a financial entity that offers financial
services, such as payment accounts and lending opportunities, to
foreign clients.. Major function of International banks are:
Arrange trade financing.
Arrange foreign exchange.
Offer hedging services for foreign currency receivables and
payables through forward and option contracts
Offer investment banking services
Borrow or lend in euro currency market
Underwrite euro bonds and foreign bonds
 TYPES OF INTERNATIONAL BANKS
1. Correspondent bank
. A correspondent bank is afinancial institutionthat provides
services on behalf of another, equal or unequal, financial
institution. Correspondent banks are most likely to be used by
domestic banks to servicetransactionsthat either originate or are
completed in foreign countries, acting as a domestic bank's agent
abroad.
. Provides a means for a banks MNC clients to conduct business
worldwide through its local bank or its contacts.
. The accounts held between correspondent banks and the banks to
which they are providing services are referred to as nostro and
vostro accounts. An account held by one bank for another is
referred to by the holding bank as anostro account. The same
account is referred as avostro accountby thecounterpartybank.
2. Representative office
A small service facility staffed by parent bank personnel that is designed
to assist MNC clients of the parent bank in dealings with the banks
correspondents.
The representative offices should represent a bank or any other financial
institution incorporated outside the country. Such bank or financial
institution should also be subject to the direct supervision and
examination of the authorities at the country of origin
It is useful when the bank has many MNC clients in a country

3. Foreign Branch
A foreign branch bank operates like a local bank, but is legally part of
the parent, not a separate entity.
They are subject to both the banking regulations of home country and
foreign country
It is the most popular means of internationalizing bank operations
4. Subsidiary and Affiliate Bank
A subsidiary bank is a locally incorporated bank that is either wholly owned or
owned in major part by a foreign parent banks.
An affiliate bank is one that is only partially owned, but not controlled by its
foreign parent

5.Offshore Banking Center

These are permitted in countries whose banking system is organized to permit
external accounts beyond the normal scope of local economic activity.
The host country usually grants complete freedom from host-country
governmental banking regulations. Banks operate as branches or subsidiaries of
the parent bank
OBCS did not deal in local currencies, and serve only the non residents. These
OBCs were used for transfering fund from one country to another country
without affecting the domestic financial market.
 Reasons for offshore banks
Low or no taxes
services provided for nonresident clients
legal regime that upholds bank secrecy.
The IMF recognizes the Bahamas, Bahrain, the Cayman
Islands, Hong Kong, the Netherlands Antilles, Panama,
Singapore as major offshore banking centers.
EURO BANK:
Eurobanksare financial institutions that accept deposits and make loans in
foreign currencies. The emergence of Euro banks was the result of Euro currency
markets. Eurocurrencyis currency held on deposit outside its home market. It
means currency held in banks located outside of the country which issues the
currency.
For example, aUS dollardenominated deposit in a Singapore bank is
Eurocurrency, or more specificallyEurodollardeposit.
The term Eurodollar refers to U.S. dollar-denominated deposits at foreign
banks or foreign branches of American banks .As they are located outside of the
United States, Eurodollars escape regulation by theFederal Reserve Board,
including reserve requirements. A Eurodollar is a dollar deposit in a European
bank. A dollar loan disbursed by a European bank, came to be known as Euro
dollar loan.
The European banks accept deposit in other foreign currencies and such deposit is
called Euro currency deposit. Euro currency loan is a loan disbursed by a
European bank in a foreign currency
The Eurobanks are not subjected to the regulatory provisons generally
applicable to domestic banks such as maintenance of cash reserve ratio,
deposit insurance etc. This was because the activities of these banks were
not supposed to affect the domestic economy. They were therefore able to
offer higher interest euro currency depositors and lower interest rate to
Euro currency borrowers. This make the Euro currency market more
attractive to the investors and borrowers of international funds.