International Banking – Features :

– Expansion: International Banking assists traders to expand their business and trade activities beyond the boundaries of a nation. Economic growth and conducive climate for carrying out the business activities in new nations are the factors because of which many enterprises are looking beyond the borders of their own nations for their business growth. Competitive advantages in respect of price, demand and supply factors, future growth opportunities, cost of production and operating costs, etc., are some of the other important factors for expansion of international trade and finance. In view of this, the presence of banks across the nations have led to the growth of international banking.

– Legal and Regulatory framework: Flexible legal and regulatory framework encourages traders and investors to enter into the international markets. Quick approval to set up business, less complicated compliance requirements and stable political situations help many new players to enter into a number of nations to expand their activities Also, due to lesser tax rates or no taxes to be payable, certain tax havens play important roles as off shore banking centers which encourages many international banking units to open their branches in such off shore centers.

– Cost of Capital: The operating efficiency of an enterprise depends upon the average cost of capital. Many companies enter into new emerging markets to take advantages of the lower cost of capital in such markets. Banks as a financial intermediary play an important role as source of funds. Banks through their professional skills take advantage of the arbitrage opportunity in different international markets and increase their profits.

– Current account and Capital account transactions: Banks play crucial role in export and import trade. By providing different types of financial and non financial support, banks help enterprises, corporate customers and individuals doing business in different countries, by extending trade finance and investment opportunities. Banks also facilitate movement of funds (inward and outward remittances) through their network and correspondent banking arrangements.

– Risks: Different risks paved ways for diversification, thereby global investors look for alternative destinations to invest their savings with twin objectives of safety of funds and better returns. In view of their presence in different time zones, international banks also face various risks.