Deck 24: International Banking

Question 1

Most Eurobonds are sold on a "best efforts"
basis in which the borrower assumes the market risk if the security issue fails to sell and receives no substantial funds until the whole issue is sold.

Answer 1

True

Question 2

Syndicated Eurocurrency credits are considered a fast method of raising loanable funds and spreading risk for international banks.

Answer 2

True

Question 3

Despite the growing impact of the Japanese in international markets no Eurobonds are denominated in yen.

Answer 3

False

Question 4

Conversion to the new European currency, the Euro, will be very easy since it will reduce by ten the number of currencies traded.

Question 5

What exactly is a multinational bank?

Question 6

What are the essential differences between the following types of banking offices or facilities: International banking departments::Representative offices
Edge Act and Agreement corporations::Shell branches Full-service branches::International banking facilities (IBFs)

Question 7

What factors appear to influence the types of services an international banking firm chooses to offer its customers?

Question 8

What are the principal services offered by the international banking industry? Please make a list of these services and briefly define what each is about.

Question 9

Please explain why foreign banks have entered the United States in considerable numbers in recent years.

Question 10

What federal government regulations apply to foreign banks operating in the United States today? Why did Congress pass laws to regulate foreign bank activity in the U. S? What is the danger if laws of this type are made too restrictive?

Question 11

What federal government agency is the chief regulator of foreign banks operating in the United States? Why do you think Congress picked this particular agency to play a leadership role in foreign bank regulation inside the United States?

Question 12

What is meant by the principle of mutual nondiscrimination? What problems does this principle pose for regulators? What advantages does it have over other regulatory approaches?

Question 13

What major problems have been encountered by the international banking community in recent years? How have these problems been dealt with?

Question 14

What is political risk? Why is it important in international banking?

Question 15

What is currency risk? What types of currency risk exposure are of special concern to international bankers?

Question 16

What important principle about international banking was revealed by the global banking crisis of the 1990s?

Question 17

How did the International Lending and Supervision Act affect international banks? How about the Basle Agreement?

Question 18

Which nonbank financial-service firms are posing a strong competitive challenge to international banking today?

Question 19

A major money-center bank in the United States wishes to expand its presence in the unfolding European Community, where it currently services corporate customers but has no physical facilities.Based on the discussion in this chapter what initial forms of facilities would you recommend to its management and why? What special problems can you anticipate given recent announcements by the European Community regarding changes in its monetary system and in its regulation of outside financial-service suppliers?

Question 20

Should the activities of foreign banks be regulated when they enter any particular domestic economy? Why or why not? What could be gained by the nation being entered and what dangers might follow? How would you propose to deal with the dangers or risks involved? Please explain the reasons behind your recommendations.

Question 21

If you were charged with evaluating the country risk associated with the following nations what factors would you want to examine?
a. Brazil
b. Korea
c. China
d. Japan
e. Argentina
Carefully explain why each factor that you specify relates to the risk exposure that an international bank making loans in each nation faces. What recent developments in each of the above nations suggest that a new assessment of country risk may be in order?