Slide 0Slide 1Chapter OutlineInternational Banking ServicesThe World’s 10 Largest BanksReasons for International BankingSlide 7Slide 8Slide 9Slide 10Slide 11Slide 12Slide 13Slide 14Slide 15Types of International Banking OfficesCorrespondent BankRepresentative OfficesForeign BranchesSubsidiary and Affiliate BanksEdge Act BanksOffshore Banking CentersSlide 23“Shell” BranchesInternational Banking FacilitiesCapital Adequacy StandardsSlide 27New Capital Adequacy StandardsInternational Money MarketEurocurrency MarketEurocreditsForward Rate AgreementsForward Rate Agreements: UsesForward Rate Agreements: ExampleSettling a FRASlide 36EuronotesEuro-Medium-Term NotesEurocommercial PaperInternational Debt CrisisSlide 41Debt-for-Equity SwapsDebt-for-Equity Swap IllustrationJapanese Banking CrisisSlide 45The Asian CrisisSlide 47Credit Crunch of 2007–2008Slide 49Slide 50Slide 51Slide 52Slide 53Slide 54Slide 55End Chapter TenINTERNATIONALFINANCIALMANAGEMENTEUN / RESNICKFifth EditionCopyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/IrwinChapter Objective:This chapter serves to begin our discussion of world financial markets and institutions. 11 Chapter ElevenInternational Banking and Money Market11-2International Banking ServicesReasons for International BankingTypes of International Banking OfficesCapital Adequacy StandardsInternational Money MarketInternational Debt CrisisJapanese Banking CrisisThe Asian CrisisCredit Crunch 2007—2008 International Banking ServicesThe World’s Largest BanksReasons for International BankingTypes of International Banking OfficesCapital Adequacy StandardsInternational Money MarketInternational Debt CrisisJapanese Banking CrisisThe Asian CrisisCredit Crunch 2007—2008 International Banking ServicesReasons for International BankingTypes of International Banking OfficesCapital Adequacy StandardsInternational Money MarketInternational Debt CrisisJapanese Banking CrisisThe Asian CrisisCredit Crunch 2007—2008 International Banking ServicesReasons for International BankingTypes of International Banking OfficesCorrespondent BankRepresentative OfficesForeign BranchesSubsidiary and Affiliate BanksEdge Act BanksOffshore Banking centersInternational Banking FacilitiesInternational Banking ServicesReasons for International BankingTypes of International Banking OfficesCapital Adequacy StandardsInternational Money MarketInternational Debt CrisisJapanese Banking CrisisThe Asian CrisisCredit Crunch 2007—2008 International Banking ServicesReasons for International BankingTypes of International Banking OfficesCapital Adequacy StandardsInternational Money MarketEurocurrency MarketsEurocreditsForward Rate AgreementsEuronotesEuro-Medium-Term NotesEurocommercial PaperInternational Banking ServicesReasons for International BankingTypes of International Banking OfficesCapital Adequacy StandardsInternational Money MarketInternational Debt CrisisHistoryDebt-for-Equity SwapsThe Solution: Brady BondsInternational Banking ServicesReasons for International BankingTypes of International Banking OfficesCapital Adequacy StandardsInternational Money MarketInternational Debt CrisisJapanese Banking CrisisThe Asian CrisisCredit Crunch 2007—2008 International Banking ServicesReasons for International BankingTypes of International Banking OfficesCapital Adequacy StandardsInternational Money MarketInternational Debt CrisisJapanese Banking CrisisThe Asian CrisisCredit Crunch 2007—2008 International Banking ServicesReasons for International BankingTypes of International Banking OfficesCapital Adequacy StandardsInternational Money MarketInternational Debt CrisisJapanese Banking CrisisThe Asian CrisisCredit Crunch 2007—2008 International Banking ServicesReasons for International BankingTypes of International Banking OfficesCapital Adequacy StandardsInternational Money MarketInternational Debt CrisisJapanese Banking CrisisThe Asian CrisisCredit Crunch 2007—2008 Chapter Outline11-3International Banking ServicesInternational Banks do everything domestic banks do and:Arrange trade financing.Arrange foreign exchange.Offer hedging services for foreign currency receivables and payables through forward and option contracts.Offer investment banking services (where allowed).11-4The World’s 10 Largest Banks1 Citigroup United States 2 JPMorgan United States 3 Bank of America United States 4 HSBC United Kingdom 5 Mitsubishi UFI Financial Group Japan6 Groupe Crédit Agricole France 7 Royal Bank of Scotland Group United Kingdom 8 BNP Paribas France 9 Santander Central Hispano Spain 10 Mizuho Financial Group Japan 11-5Reasons for International BankingLow Marginal CostsManagerial and marketing knowledge developed at home can be used abroad with low marginal costs.11-6Reasons for International BankingLow Marginal CostsKnowledge AdvantageThe foreign bank subsidiary can draw on the parent bank’s knowledge of personal contacts and credit investigations for use in that foreign market.11-7Reasons for International BankingLow Marginal CostsKnowledge AdvantageHome Nation Information Services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.11-8Reasons for International BankingLow Marginal CostsKnowledge AdvantageHome Nation Information ServicesPrestigeVery large multinational banks have high perceived prestige, which can be attractive to new clients.11-9Reasons for International BankingLow Marginal CostsKnowledge AdvantageHome Nation Information ServicesPrestigeRegulatory AdvantageMultinational banks are often not subject to the same regulations as domestic banks.11-10Reasons for International BankingLow Marginal CostsKnowledge AdvantageHome Nation Information ServicesPrestigeRegulatory AdvantageWholesale Defensive StrategyBanks follow their multinational customers abroad to avoid losing their business at home and abroad.11-11Reasons for International BankingLow Marginal CostsKnowledge