International Commercial Banking

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					International Commercial
Chapter 4
Hughes and MacDonald Text
Key Concepts
   International commercial banking must
    evolve to meet the needs of international
    companies in terms of securing financing for
    their global activities
   It also must respond to and reflect the state of
    competition, technology and trends in
Overseas Operations
Overseas operations can be structured in a number of ways. The following are
    in order of commitment:

    1.   Correspondent Banking – lowest possible level of exposure to the foreign market
         involving using a native bank in the foreign market to provide services for the foreign
    2.   Representative Office – the foreign bank establishes a physical presence in the
         foreign market offering a limited range of services. Officers troll for business
         opportunities but cannot accept deposits or lend funds on its own books.
    3.   Agency – an integral part of the parent bank but cannot perform all of the functions of
         a branch.
    4.   Branch Office – is an integral part of the parent bank and acts as a legal and
         functional arm of the head office. Branches may perform all banking functions that
         are permitted by the host country.
    5.   Subsidiary – separate legal entity from the parent, thereby isolating liability within
         the subsidiary itself. It must be separately capitalized, and if it is not deposit-taking,
         the cost of capital in the foreign market can be considerable.
    6.   Consortium Banks – a group of banks that form an alliance to enter a new market.
Functions of Global Commercial Banks

   Syndicated loans – a credit extended by a group of
    banks to a single customer
   Project Finance
   Trade Finance (letter of credit, standby letter of
    credit, performance letter of credit
   Commercial Paper and Note Issuance Facilities
   Non-credit services – including global custody and
    cash management services.