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Financial Markets: Distinguishing between international banking and global banking - Assignment Example

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Financial Markets: Distinguishing between international banking and global banking

Straightly speaking, international banking deals with collection funds in favor of a target client in a foreign country while global banking refers to gathering funds for financing the claims of foreign borrowers from within the same country.
Business transactions of both of them differ in the function fund distribution and risk allocation strategy. International banking borrows directly from another country; in this regard, the lender country collects funds by obtaining deposits from residents and transfers it on term bases. Global banking, on the other hand, recruits different bodies in the borrowing country for attracting potential local depositors and distribute the fund thereby. In the international banking deal, the funding system starts with a foreign saver and the deposit flows to the head office in the lending country. During transfer it is considered as an international loan and the currency exchanged is subject to value variations. Though this scenario is common in both aspects, it is more directly felt in international banking.

b) A strict choice between both international and global banking has to be exercised while allocating fund flow on debt basis to a foreign country. Feasibility of Japan’s financial structure to repay the debt must be the first concern while considering the scope of a viable transaction in the money lending. There are five ways in which a fund transfer on debt basis is possible from a USA based banker to a Japan borrower. In the first banking option, i.e., in International Banking, savers among residents of the USA are invited for their investment in the process as deposits which reach the Head Office in the country and the amount collected can be transferred as loan across the border. The borrower who receives the money directly essentially has to be Japanese in this regard.
On the other hand, savers’ deposit in various branches of the US owned banks travel in the similar way but when reaching the international banking process, the deposit must go to an American Banking franchise which allots the loan to the borrower. But the difference is felt when the bank regulates the fund according to the US norms. A USA banker can also receive deposit from the Japanese keeping a head office as the main frame and return the fund as loan to the borrower in another case of international banking. In this system, the functioning becomes easier between the two countries and cross border transaction is only subject to value exchange variables of the two currencies.
In the global banking system, the head office’ interference is omitted as the loan amount is raised either solely by the US affiliate bank which raises fund from the depositors in Japan. And the final way is by the transfer of US saver’s deposit straightly US affiliate bank in Japan which goes as loan to the borrower. c) The positions mentioned by global banking systems take acute care for the consideration of currency values of different countries. From the analysis of functional banking strategy, it is easily ascertained that global banking has an edge over purely international banking. The asset value analysis is normally done with the aid of banking approximations adjusted with the BIS norms. Locally funded claims are expected to be at a lower value than the total value of local claims and ...Show more
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Summary

Distinguishing between international banking and global banking is a difficult task owing to similarity of identities in their application as the two concepts look analogous in a general sense. However, when a micro level examination of the functioning of the fund management system is carried out, it is clear to identify the diverging point of both streams…
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