1、Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-0 7 International Banking and Money Market (Chapter 11) Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-1 Essential Reading The Whole Chapter Irwin/McGraw-Hill Copyri
2、ght 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-2 Main Contents lInternational Banking lInternational Money Market lInternational Debt Crisis Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-3 The Worlds 10 Largest Banks 1.BNP Paribas Fran
3、ce 2.Royal Bank of Scotland Group United Kingdom 3.HSBC United Kingdom 4.Crdit Agricole France 5.Bank of America United States 6.BarclaysUnited Kingdom 7.Deutsche Bank Germany 8.JP Morgan ChaseUnited States 9.Mitsubishi UFI Financial Group Japan 10.Citigroup United States Irwin/McGraw-Hill Copyright
4、 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-4 lLow Marginal Costs nManagerial and marketing knowledge developed at home can be used abroad with low marginal costs. Reasons for International Banking Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights res
5、erved. 6-5 lLow Marginal Costs lKnowledge Advantage nThe foreign bank subsidiary can draw on the parent banks knowledge of personal contacts and credit investigations for use in that foreign market. Reasons for International Banking Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc.
6、 All rights reserved. 6-6 lLow Marginal Costs lKnowledge Advantage lHome Nation Information Services nLocal firms in a foreign market may be able to obtain more complete information on trade and financial markets in the multinational banks home nation than is obtainable from foreign domestic banks.
7、Reasons for International Banking Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-7 lLow Marginal Costs lKnowledge Advantage lHome Nation Information Services lPrestige nVery large multinational banks have high perceived prestige, which can be attractive to
8、 new clients. Reasons for International Banking Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-8 lLow Marginal Costs lKnowledge Advantage lHome Nation Information Services lPrestige lRegulatory Advantage nMultinational banks are often not subject to the sa
9、me regulations as domestic banks. Reasons for International Banking Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-9 lLow Marginal Costs lKnowledge Advantage lHome Nation Information Services lPrestige lRegulatory Advantage lWholesale Defensive Strategy nB
10、anks follow their multinational customers abroad to avoid losing their business at home and abroad. Reasons for International Banking Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-10 Reasons for International Banking lLow Marginal Costs lKnowledge Advanta
11、ge lHome Nation Information Services lPrestige lRegulatory Advantage lWholesale Defensive Strategy lRetail Defensive Strategy nMultinational banks also compete for retail services such as travelers checks, tourist and foreign business market. Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Compa
12、nies, Inc. All rights reserved. 6-11 lKnowledge Advantage lHome Nation Information Services lPrestige lRegulatory Advantage lWholesale Defensive Strategy lRetail Defensive Strategy lTransactions Costs nMultinational banks may be able to circumvent government currency controls. Reasons for Internatio
13、nal Banking Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-12 lHome Nation Information Services lPrestige lRegulatory Advantage lWholesale Defensive Strategy lRetail Defensive Strategy lTransactions Costs lGrowth nForeign markets may offer opportunities to
14、 growth not found domestically Reasons for International Banking Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-13 lPrestige lRegulatory Advantage lWholesale Defensive Strategy lRetail Defensive Strategy lTransactions Costs lGrowth lRisk Reduction nGreater
15、 stability of earnings due to diversification. Reasons for International Banking Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-14 Types of International Banking Offices lCorrespondent Bank lRepresentative Offices lForeign Branches lSubsidiary and Affiliat
16、e Banks lEdge Act Banks lOffshore Banking Centers lInternational Banking Facilities Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-15 Correspondent Bank lA correspondent banking relationship exists when two banks maintain deposits with each other. lCorresp
17、ondent banking allows a banks MNC client to conduct business worldwide through his local bank or its correspondents. Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-16 Representative Offices lA representative office is a small service facility staffed by pa
18、rent bank personnel that is designed to assist MNC clients of the parent bank in dealings with the banks correspondents. lRepresentative offices also assist with information about local business customs, and credit evaluation of the MNCs local customers. Irwin/McGraw-Hill Copyright 2001 by The McGra
19、w-Hill Companies, Inc. All rights reserved. 6-17 Foreign Branches lA foreign branch bank operates like a local bank, but is legally part of the the parent. nSubject to both the banking regulations of home country and foreign country. nCan provide a much fuller range of services than a representative
20、 office. lBranch Banks are the most popular way for U.S. banks to expand overseas. Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-18 Subsidiary and Affiliate Banks lA subsidiary bank is a locally incorporated bank wholly or partly owned by a foreign parent
21、. lAn affiliate bank is one that is partly owned but not controlled by the parent. lU.S. parent banks like foreign subsidiaries because they allow U.S. banks to underwrite securities. Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-19 Edge Act Banks lEdge A
22、ct banks are federally chartered subsidiaries of U.S. banks that are physically located in the U.S. that are allowed to engage in a full range of international banking activities. lThe Edge Act was a 1919 amendment to Section 25 of the 1914 Federal Reserve Act. Irwin/McGraw-Hill Copyright 2001 by Th
23、e McGraw-Hill Companies, Inc. All rights reserved. 6-20 Edge Act Banks lFederal Reserve Regulation K allows Edge Act banks to do the following: nAccept foreign deposits nExtend trade credit nFinance foreign projects abroad nTrade foreign currencies nEngage in investment banking activities with U.S c
24、itizens involving foreign currencies lIt is throughj the Edege Act that U.S parent banks own foreign banking subsidiaries and have ownership positions in foreign banking facilities. Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-21 Offshore Banking Centers
25、 lAn offshore banking center is a country whose banking system is organized to permit external accounts beyond the normal scope of local economic activity. lThe host country usually grants complete freedom from host-country governmental banking regulations. Irwin/McGraw-Hill Copyright 2001 by The Mc
26、Graw-Hill Companies, Inc. All rights reserved. 6-22 Offshore Banking Centers lThe principal features that makes a country attractive for establishing an offshore banking operation are total freedom from host-country government banking regulations- nLow reserve requirements and no deposit insurance n
27、Low taxes nA favorable time zone for international banking transaction. nStrict banking secrecy laws nAttractive Interest rate Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-23 Offshore Banking Centers lThe IMF recognizes nthe Bahamas nBahrain nthe Cayman
28、Islands nHong Kong nthe Netherlands Antilles nPanama nSingapore las major offshore banking centers Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-24 International Banking Facilities lAn international banking facility is a separate set of accounts that are
29、segregated on the parents books. lAn international banking facility is not a unique physical or legal identity. lAny U.S. bank can have one. lInternational banking facilities have captured a lot of the Eurodollar business that was previously handled offshore. Irwin/McGraw-Hill Copyright 2001 by The
30、McGraw-Hill Companies, Inc. All rights reserved. 6-25 Capital Adequacy Standards lBank capital adequacy refers to the amount of equity capital and other securities a bank holds as reserves against risky assets to reduce the probability of a bank failure. lIn a 1988 agreement known as the Basle Accor
31、d, the Bank for International Settlement(BIS) established a framework for measuring bank capital adequacy. 8% is stipulated as the minimum rate. lThere are various standards and international agreements regarding how much bank capital is “enough” to ensure the safety and soundness of the banking sys
32、tem. Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-26 Capital Adequacy Standards lWhile traditional bank capital standards may be enough to protect depositors from traditional credit risk, they may not be sufficient protection from derivative risk. lFor e
33、xample, Barings Bank, which collapsed in 1995 from derivative losses, looked good on paper relative to capital adequacy standards. Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-27 Capital Adequacy Standards Shareholder equity lTier 1: Core Capital 50% l R
34、etailed Earnings l l Preferred stocks lTier 2: Supplementary Capital : 50% l Subordinated bonds l government obligation 0% l short-term interbank assests 20% lAssets l residential mortage 50% l other assets 100% l Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserve
35、d. 6-28 Capital Adequacy Standards lIn June 2004, the new capital adequacy framework commonly referred to as Basel II was endorsed by central bank governors and bank supervisors in the G-10 countries. lIts implemented in the end of 2006. Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies,
36、 Inc. All rights reserved. 6-29 Capital Adequacy Standards lBasel II is based on three mutually reinforcing pillars: minimum capital requirements, a supervisory review process, and the effective use of market discipline. Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights
37、reserved. 6-30 Capital Adequacy Standards lWith respect to the first pillar ( the minimum capital requirements), bank capital is defined as per 1988 accord, but the minimum 8% ratio is calculated on the sum of the banks credit, market, and operational risk. Irwin/McGraw-Hill Copyright 2001 by The Mc
38、Graw-Hill Companies, Inc. All rights reserved. 6-31 Capital Adequacy Standards lThe second pillar is designed to ensure that each bank has a sound internal process in place to properly assess the adequacy of its capital based on a thorough evaluation. Irwin/McGraw-Hill Copyright 2001 by The McGraw-H
39、ill Companies, Inc. All rights reserved. 6-32 Capital Adequacy Standards lThe third pillar is designed to complement the other two. It is believed that public disclosure of key information will bring market discipline to bear on banks and supervisors to better manage risk and improve bank stability.
40、 Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-33 International Money Market lThe international money market: Where borrowing or lending have a year or less to maturity Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserve
41、d. 6-34 The International Money Market lFunctions nBanks with a temporary shortage of money can borrow from those with a surplus nCompanies, financial institutions and local governments with a temporary shortage of money can borrow form those with a surplus Irwin/McGraw-Hill Copyright 2001 by The Mc
42、Graw-Hill Companies, Inc. All rights reserved. 6-35 The International Money Market lCharacteristics nThere is no single marketplace nWebs of borrows and lenders-linked by telephones and computers nA wholesale market nAll short term lending and borrowing nNo mortgage nNo single set of posted prices n
43、Money market instruments pay fixed interest-and most are sold at a discount to the face value Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-36 The International Money Market lActually, the international money market mainly includes eurocurrency business.
44、Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-37 International Money Market lEurocurrency is a time deposit in an international bank located in a country different from the country that issued the currency. nFor example, Eurodollars are U.S. dollar-denomi
45、nated time deposits in banks located abroad. nEuroyen are yen-denominated time deposits in banks located outside of Japan. nThe foreign bank doesnt have to be located in Europe. Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-38 lMost Eurocurrency transacti
46、ons are interbank transactions in the amount of $1,000,000 and up. lCommon reference rates include nLIBOR the London Interbank Offered Rate nPIBOR the Paris Interbank Offered Rate nSIBOR the Singapore Interbank Offered Rate lA new reference rate for the new euro currency Eurocurrency Market n EURIBO
47、R the rate at which interbank time deposits of are offered by one prime bank to another. Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-39 Eurocredits lEurocredits are short- to medium-term loans of Eurocurrency. lThe loans are denominated in currencies ot
48、her than the home currency of the Eurobank. lEurocredits feature an adjustable rate. On Eurocredits originating in London the base rate is LIBOR. Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-40 Eurocredits lBecause eurocurrency loans are frequently too l
49、arge for a single bank to handle, Eurobanks will band together to form a bank lending syndicate to share the risk. lThe lending rate on these credits is stated as LIBOR+X% lRollover pricing is created on Eurocredits so that eurobanks do not end up paying more on time deposits than they earn from the
50、 loans. Irwin/McGraw-Hill Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-41 Eurocredits Example lTeltrex international can borrow $3,000,000 at LIBOR plus a lending margin of 0.75 percent per annum on a three-month rollover basis from Barclays in London. Suppose that three-
