Chapt 11 Flashcards
Managerial and marketing knowledge developed at home can be used abroad with ____
Marginal Low Cost
The foreign bank subsidiary can draw on the parent bank’s knowledge of personal contacts and credit investigations for use in that foreign market.
Knowledge Advantage
Major distinguishing features between domestic banks and international banks are
D. ALL of the above
Since international banks have the facilities to trade foreign exchange
C. they generally also trade foreign exchange products for their own account.
Banks that both perform traditional commercial banking functions and engage in investment banking activities are often called
D. merchant banks.
Merchant banks are different from traditional commercial banks in what way(s)?
A. Merchant banks can engage in investment banking activities.
By far the most important international finance centers are
B. New York, London, and Tokyo.
A domestic bank that becomes a multinational bank to prevent erosion by foreign banks of the traveler’s checks, touring, and foreign business market
Retail defensive strategy
A bank that establishes for this reason is when very large multinational banks have high perceived prestige, liquidity, and deposit safety that can be used to attract clients abroad.
Prestige
When a bank stablishes for this reason has greater stability of earnings is possible with international diversification. Offsetting
business and monetary policy cycles across nations reduces the country-specific risk of any one nation.
Risk reduction
Which are reasons why a bank may establish a multinational operation?
A. Low marginal and transaction costs
B. Home nation information services, and prestige
C. Growth and risk reduction
D. All of the above
Correspondent bank services include
prepaid postage and packing materials
foreign exchange conversions
is a small service facility staffed by parent bank personnel that is designed to assist MNC
clients of the parent bank in dealings with the bank’s correspondents.
Representative office
operates like a local bank, but legally is a part of the parent bank
Foreign bank branch
The most popular way for a U.S. bank to expand overseas is
Branch bank
Multinational banks are often not subject to the same regulations as domestic banks. There may be reduced need to publish adequate financial information, lack of required deposit insurance and reserve requirements on foreign currency deposits, and the absence of territorial restrictions
Regulatory Advantage
The biggest bank in the world
CitiGroup
banks follow their multinational customers abroad to prevent the erosion of their clientele to foreign banks seeking to service the multinational’s foreign subsidiaries.
Wholesale defensive
by maintaining foreign branches and foreign currency balances, banks may reduce
transaction costs and foreign exchange risk on currency conversion if government controls can be circumvented.
Transaction Costs
growth prospects in a home nation may be limited by a market largely saturated with the services offered by domestic banks.
Growth
Local firms in a foreign market may be able to obtain more complete information on trade and financial markets in the multinational bank’s home nation than is obtainable from foreign domestic banks.
Home Country Information Services
two banks maintain deposits with one another.
correspondent bank relationship
A locally incorporated bank that is wholly owned by a foreign parent.and majority owned by a foreign parent
Subsidiary Bank
a locally incorporated bank that is partially owned (but not controlled) by a foreign parent.
Affiliate bank
Foreign banks that establish subsidiary and affiliate banks in the U.S.
A. tend to locate in states that are major centers of financial activity.
B. tend to locate in the highly populous states of New York, California, Illinois, Florida,
Georgia, and Texas.
C. can underwrite securities, but not accept dollar-denominated deposits.
D. both a) and b)
D
Can accept foreign deposits, extend trade credit, finance foreign projects abroad, trade
foreign currencies, and engage in investment banking activities with U.S. citizens involving foreign securities.
Are federally chartered subsidiaries of U.S. banks that are physically located in the United States and are allowed to engage in a full range of international banking activities.
Edge Act
a country whose banking system is organized to permit external accounts beyond the normal economic activity of the county.
Offshore banking
operate as branches or subsidiaries of the parent bank.
Offshore bank
Which banks cannot accept foreign deposits?
Domestic bank in US
bank capital adequacy refers to the amount of equity capital a bank holds as reserves
against impaired loans
Capital Requirements
a time deposit of money in an international bank located in a county different from the
country that issued the currency.
Eurocurrency
is a market rate, analogous to the U.S. Federal Funds rate.
LIBOR
are short- to medium-term loans of Eurocurrency extended by Eurobanks to corporations,sovereign governments, nonprime banks, or international organizations.
Eurocredits
Correspondent bank services include
A. prepaid postage and packing materials
C. Foreign exchange conversions
Eurodollars refers to dollar deposits when the depository bank is located in
outside US
A DECREASE in the implied three-month LIBOR yield causes Eurodollar futures price
Increase
The crisis that followed a period of economic expansion in the region financed by record private capital inflows.
Asian Crisis
