52. International banking: the structure and operational function, the services offered, and measures to improve the efficiency and effectiveness of the international banking organization.

International (world/global) banking provides financial services to commercial and corporate markets. A bank's international structure is defined by performing operations and transactions between different countries and continents.

Structure

The international operation of a bank may be conducted in a separate division or department even though many of the activities parallel those performed elsewhere in the bank. Large banks typically operate an international division, which may include a network of foreign branches, subsidiaries, and affiliates. Smaller banks or those with limited international activity often use only a separate department in conjunction with a network of foreign correspondent banks. In either case, the international section will usually have its own management and staff, as well as distinct accounting systems and controls.

There is a variety of organizational structures of intern.banking:

-representative offices (support the parent bank, market its services, no deposits, no loans),

-agency offices (make loans, technical assistance, advise customers)

-branch offices (are not separate legally from their parent banks; can accept deposits from the public),

-subsidiaries (legal obligation of a parent banking firm is restricted to the capital it invested in each subsidiary; if the parent company fails, the subsidiary won’t necessarily fail too);

-joint ventures with foreign banks (if a company is concerned about risks when entering a foreign market, lacking customer contacts abroad or expertise). Activities

-Lending (short- and long-term, international and domestic);

-deposit placements (Banks may maintain interest-bearing time deposits with foreign banks);

-Investments (allocation of capital and risk to investments in foreign debt securities and/or debentures. The debentures may be issued by a foreign bank, corporation, or sovereign government for their respective capital needs.),

-supply of foreign currency to customers (currency trading where dealers speculate on trends in the prices of some currencies)

-protecting customers against interest rate risk and hedging against currency risks (due to fluctuations in currency prices) with currency futures, forwards, options and currency swaps;

-issuance and acceptance of drafts in payment for purchases of goods and services;

-underwriting customer note and bond issues in the Eurobond market (when borrowers issue bonds outside their home country),

-helping customers market their products through export trading companies.

As many international banks are engaged in international lending, there can be big risks. Possible solutions to mitigate these risks can be:

-restructuring loan agreements (with lower interest rates and longer maturity), selling intern.loans (it removes such problem credits from the lender’s balance sheet, provides funding for new assets, may raise value of bank’s stock); create checklists to list economic and political factors connected with loans, use expert opinion (the Delphi method) to evaluate risks.