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International Banking. Concepts and examples. 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
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International Banking Concepts and examples
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 Biggest Banks (assets in billion of dollars:1998)
World's financial centers: LondonTokyo New YorkParis, Frankfurt, Zurich, Amsterdam, etc.
Foreign Exchange Trading Income of Selected Banks( in millions of US$ ) Company 1977 1987 1997 1998 1999 Bank of New York NA NA 109 126 137 Chase Manhattan 55 385 790 936 807 Citicorp 68 453 1,486 1,628 1,569 Credit Suisse First Boston NA NA 699 97 897 Deutsche Bank NA NA 1,040 636 807 Mellon Financial Corp 6 8 118 165 173 Morgan (J.P.) & Co. 40 251 493 781 777 Republic National Bank 5 39 98 120 141 State Street Bank 2 21 159 177 209
Reasons for international banking: • International trade and investment • Low marginal costs • Arbitrage regulations • Defensive strategies • Limited domestic market • Risk reduction
1. Exporter ships the goods 2. Importer pays after receiving the goods A Primer on Import/Export Payments Importer’s preference Importer Exporter
2. Exporter ships the goods after payment 1. Importer pays the goods A Primer on Import/Export Payments Exporter’s preference Importer Exporter
1. Importer obtains bank’s permission to pay on importer’s behalf 2. Bank promises exporter to pay on behalf of importer 4. Bank pays exporter 6. Importer pays bank 5. Bank releases merchandise to importer 3. Exporter ships to the bank The Bank as an Export/Import Intermediary Importer Bank Exporter
2. Exporter agrees to fill order 1. Importer orders goods 6.. Exporter ships goods 7. Exporter presents shipping documents to bank X 3. Importer arranges L/C with bank I 5. Bank X advises exporter of L/C 12. Payment 4. Bank I sends L/C to bank X 11. Payment 8. Bank X presents shipping documents to bank I 9. Bank I accepts documents and promises to pay within 60 days 13. Investor presents documents and gets paid 10. Bank X sells acceptance documents A Typical Trade Transaction Importer Exporter Bank X Bank I Public investor
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 avoidance: Benefits Lincoln belge gets a tax deduction Old Abe gets a tax free interest income