International banking services provides retail, commercial, corporate, and trade finance services to clients around the world through branches, agencies, representative offices, subsidiaries, and affiliates.
International banking services can make international transactions more efficient and secure.
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Functions of International Banking
The functions of international banking are as follows:
- Taking deposits and making loans in domestic currency to foreign governments, enterprises, and individuals.
- Taking deposits and lending in foreign currencies to domestic and foreign entities.
- Managing and acting as agents for syndicated loans, designing special financing requirements for international trade and projects.
- Foreign exchange transactions, dealing in gold and precious metals, international money transfers.
- Providing documentary letters of credit, standby letters of credit, multiple currency credit lines, bank acceptances, Euro note insurance facilities.
- Trading in currency futures and options, financial futures and options, interest rate and asset swaps, writing interest rate caps.
- Underwriting and placement of Eurobond issues, distribution of Euro commercial paper, assisting cross border mergers, acquisitions and sales, financial advisory, and investment services.
Key Services Offered by International Banking to Their Customers.
Forms of International Banking
There are different types of international banking offices ranging from correspondent bank relationships, through which minimal service can be provided to banks customers to branch offices and subsidiaries providing a fuller array of services.
1. Correspondent Bank
A correspondent bank is a bank located elsewhere that provides a service on behalf of another bank, besides its normal business.
The correspondent banking system enables a bank’s foreign client to conduct business worldwide through his local bank or its contacts.
2. Representative Offices
A representative office is a small service facility staffed by the parent bank personnel that is designed to assist the foreign clients of the parent bank in dealings with the bank correspondents and to provide the clients with a level of services greater than that provided through merely a correspondent relationship.
Related: What is Universal Banking
3. Foreign Branches
Foreign branches, which may provide full services, may be established when the volume of business is sufficiently large and when the law of the land permits it.
Foreign branches facilitate better service to the clients and help the growth of the business.
4. Subsidiaries and Affiliates
A subsidiary bank is a locally incorporated bank that is either wholly or largely owned by a foreign parent and an affiliate bank is one that is only partially owned but not controlled by its foreign parent.
Subsidiaries and affiliates are normally meant to handle a substantial volume of business.
Their autonomy, compared to branches, is more operational and has strategic management leverage.
5. Offshore Financial Centers
A major contribution to the growth of international banking is offshore banking centers.
An offshore banking center is a country whose banking system is organized to permit country attractive for establishing an offshore banking operation are virtually total freedom from host country government banking regulations, like, low reserve requirements and no deposit insurance, low taxes, a favorable time zone that facilitates international banking transactions, and to a minor extent, strict banking secrecy laws.
Offshore banks operate as branches or subsidiaries of the parent bank.
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