• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

What is an international bank? How do international banks compete?

Extracts from this document...


What is an international bank? How do international banks compete? The banking system became internationalised in the 1960s and since then it has been one of the most dramatic trends in the economy. The other two major trends in international and domestic banking are globalisation and securitisation. There are three definitions of an international bank according to Prof. Aliber. A bank may be said to be international if it uses branches or subsidiaries in foreign countries to conduct business. Secondly, a bank may be said to be international if it relates to the currency denomination of the loan or deposit independent of the location of the bank. And the last way of defining international banking is by the nationality of the customer and the bank. The definition for international banking includes location of parent banks and their banking facilities, residency of customers and currency denomination. The existence of international bank service activity is explained by the international trade theory. Banks engage in international banking activities because of the theory of comparative advantage. When a country produces a good or a service at its highest efficiency in that particular country it is said to have comparative advantage. ...read more.


This is done with sponsors which will be countries that have interest in seeing the project taking place. Project financing rest on three main items which are: that the income should be sufficient to service the debt, the asset value of the project should be sufficient to pay the capital amount the project should liquidate and that sponsors provide a long-term guarantee. * Leverage buyout loans. They are used when acquiring a commercial company. Basically the assets of company being bought will serve as collateral. In such cases, a bank will be financing the total sum of money required. The commercial bank will make an agreement to be paid prior to the shareholders. * Note issuing facilities. It could be the case when the bank is guaranteeing the payment of the capital on the assets. In addition, this contains the form of a commitment by the bank to purchase the remainder of the issue which were not bought by the public. * Loan syndication. This is when a group of banks will join forces to lend a sum of money together on common terms and conditions to one borrower. ...read more.


Also bank branches should not be very far away from the centre of the city or village and should have opening hours convenient to the customers. In order to increases in the number of customers, the bank should be aware that the customers have a lot of confidence in it. If customers' confidence begins to decrease, they can withdraw their deposits and there can be a bank failure. A method to increases confidence in the customers is by having adequate capital in order to buffer for any possible losses. In banking, technology is also an important factor in competition. It has made it possible for banks to always offer new services that previously were not there and in additional, technology has impact on how banks operate. Financial innovations are another factor that banks have to compete with. These innovations include new organization set-ups, new systems and new products and services. Product innovation arises because of constraints like competition. Internationalisation and globalisation of financial institutions and markets are two of the important areas in banking and finance. The more technology improves the existing systems in banking, the more there are financial innovations. And this helps more banks to go on international basis and improve their services and introduce new ones. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level UK, European & Global Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Here's what a teacher thought of this essay

4 star(s)

This has been a fair description of the international banking market but the analysis is limited. More should have been made of the benefits and drawbacks of the international banking market. At this level, more evaluation is required.

Marked by teacher Dennis Salter 04/10/2013

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level UK, European & Global Economics essays

  1. Peer reviewed

    Discuss the economic consequences of inflation?

    4 star(s)

    Unanticipated inflation causes uncertainty for businesses, lenders and borrowers. Industry cannot plan investment and is unsure about how fast costs particularly labour; will rise. Unpredictable inflation brings huge risks and so puts firms off from investing. Thus inflation damages potential growth through damaging investment and profits. In contrast low and steady rates of anticipated inflation can be helpful.

  2. How reliable are National income statistics as a means of comparing living standards between ...

    For example Sweden is colder than Italy and hence must spend more on fuel. However this spending is not exactly making an average Swede better-off than an Italian. France is a comparatively larger country than UK and have relatively lesser people living in urban areas than congested as population density

  1. A study of Patent system in India in the light of Patent Cooperation Treaty.

    If we look the Indian Patent Law, no exact definition has been provided. In Section 2(m) of The Patents Act, 1970, patent means a patent granted under this act and includes for the purpose of the sections. Thus, it is an inclusive definition but, it didn't give any clear picture of the exact meaning of the word Patent.

  2. Is globalisation merely imperialism by another name?

    However, investors are not the only ones causing the exploitation of indigenous workers. Leaders of certain countries surrender their land to foreign clients as well as surrendering the hope of ever improving the quality of life of their citizens. In some cases this is due to their financial dependence on

  1. The Impact of Globalisation upon the Japanese Economy

    Technology such as refrigeration and electronic tagging has made transport and inventory control faster and more efficient. This has improved Japan's ability to trade goods back and forth internationally, which has helped Japan regain its previous power. The deregulation of financial markets worldwide has impacted on the amount of trade within the Japanese economy beneficially.

  2. Why was Britain the First Industrial Nation?

    The second phase, in 1790s has been dubbed 'Canal Mania' with the completion of several important canals and the setting-up of 51 new schemes. By 1820, the canal network linking all the major centres of industrial production was largely completed.

  1. Advantages and Disadvantages of International Trade

    Besides that, it may exhaust resources for example, intensive cultivation of the land thus it has operation of law of diminishing returns in agricultural countries and make the poor by exerting too much burden over the resources.

  2. The benefits and harm caused by Transnational Companies.

    They are paid extremely low wages and work for very long hours. Although there will be inspections, most inspections focus on the product quality and neglect the labour conditions of the working force. Most of the time, young children are employed and membership of unions is prohibited.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work