HELP FOR PROJECT ON MULTINATIONAL BANKS

bhavin_3

Par 100 posts (V.I.P)
Dear MPITES.

Its very difficult to help if you question ends with i need a banking project. We are here to provide a platform wherein each one can help each another and not just askin for projects. So why dont you come across with what kind of work have you done till now, the core of the project and where are you finding difficulties so we can help on that end.
 
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aky

New member
hi
i m a bbi student and need help for the project, can u plz send some information which u have collected. plz thank you
 

naim

New member
THE MULTINATIONAL BANK

To complete the theoretical picture of global banking, the second question should be addressed – that is, why do banks set up branches or subsidiaries and therefore become multinational banks? The question is best answered by drawing on the theory of the determinants of the multinational enterprise. A multinational enterprise (MNE) is normally defined as any firm with plants extending across national boundaries. Modifying this definition for banking, a bank with cross – border branches or subsidiaries is a multinational bank.
It is important to stress from the outset that location efficiency conditions in a given country are necessary, but not sufficient to explain the existence of MNEs. Location efficiency refers to the choice of a plant location – comparatively, there is an advantage in being the lowest cost producer of a good or service. However, to explain the existence of the MNE, other factors are at work – otherwise, one would observe a domestically domiciled firm producing and exporting the good or service. Thus, one has to look beyond locational efficiency to explain why a plant is owned by non-resident shareholders.
There are two important reasons why an MNE rather than a domestic form produces and exports a good or service. Barriers to free trade, due to government policy or monopoly power in supply markets, is the first explanation for the existence of MNEs. For example, Japanese manufacturers have set up European subsidiaries, hoping to escape some of the harsh European trade barriers on the import of Japanese manufactured goods. The second is imperfections in the market place, often in the form of a knowledge advantage possessed by a certain type of firm which cannot be easily traded. American fast food conglomerates have been very successful in global expansion through franchises, which profit from managerial and food know-how originally developed in the USA.
The same framework can be applied to explain the presence of multinational banks (MNBs). Banks may opt to set up branches or subsidiaries overseas because of barriers to free trade and / or market imperfections. For example, US regulations in the 1960s effectively stopped foreigners from issuing bonds in the USA and American companies from using dollars to finance foreign direct investment. US banks got round these restrictions by using their overseas branches, especially in London, because it was a key centre for global finance. Later, these banks used their London subsidiaries to offer clients investment banking services, prohibited under US law.
Additionally, the nature of banking means banks possess a number of intangible assts, which cannot be traded in the market place. For example, a bank may wish to profit from the employment of superior management skills in a foreign country, provided locational efficiency conditions are met. Thus, US banks with management expertise in securitization may transfer these experts to their London subsidiaries, as the securitization may transfer these experts to their London subsidiaries, as the securitization business in Europe grows. Japanese banks have established subsidiaries in London and New York, where the markets are subject to fewer regulations than in Japan. This move was partly motivated by a belief that experience gained in other markets would give bankers a competitive edge in the event that Japanese financial markets are deregulated.
Reputation is an important intangible asset possessed by banks. Many of the London merchant banks have established offices in other countries, to exploit their reputation for expertise in corporate finance, and other investment banking services. It is not possible to sell reputation on an open market. Provided locational efficiency conditions are met, reputation may be a profitable reason for a bank expanding across national borders.
Many authors (for example, Coulbeck, 1984) have argued that MNBs exist because banks need to follow their corporate customers overseas. The theory outlined above is not inconsistent with this traditional explanation. Suppose the customer of a bank decides to set up a subsidiary in a foreign country. The lending bank may follow the customer to meet the service demands of the client. In the days of colonial trade, when banking systems were underdeveloped, this factor was more important than today, when firms are expanding into countries, which, in most cases, already have well developed banking systems. But even if the multinational has operations in a developed economy with an extensive banking system, it may wish to employ the services of a home country bank because the cost of local bank credit, with no local knowledge of the firm, is likely to be higher.
Additionally, the bank may follow the corporate customer overseas to protect its own assets. If the bank is going to lend funds to a multinational firm, it will require information on the foreign operations to properly assess the creditworthiness of the client. The optimal way of gathering information may be the establishment of a branch or subsidiary in the foreign country. Effectively, the bank internalizes the implicit market for this information.
To summarise, the term international banking should be defined to include two different activities: trade in international banking services, consistent with the traditional theory of competitive advantage for why firms trade, and MNBs, consistent with the economic determinants of the multinational enterprise. Having classified international banking in this way, attention will now turn to developments in international banking services and multinational banking.

HISTORICAL BACKGROUND

Multinational banks (MNBs) are banks with subsidiaries, branches, or representative offices which spread across national boundaries. They are in no way unique to the post – war period. For example, from the 13the to 16th centuries, the merchant banks of the Medici and the Fugger families had branches located throughout Europe, to finance foreign trade. In the 19th centuries, MNBs were associated with the colonial powers, including Britain and, later on, Belgium, Germany and Japan. The well – known colonial MNBs include the Hong Kong and Shanghai Banking Corporation (HSBC), founded in 1865 by business interests in Hong Kong specializing in the “China trade” of tea, opium and silk. Silver was the medium of exchange. By the 1870s, branches of the bank had been established throughout the Pacific basin. In 1992, the colonial tables were turned when HSBC acquired one of Britain’s major clearing banks, the Midland Bank.
The National Bank of India was founded in 1863, to finance India’s export and import trade. Branches could be found in a number of countries trading with India. The Standard Bank was established in 1853 specializing in the South African wool trade. Headquartered in London, it soon expanded its activities to new developments in South Africa and Africa in general. Presently it is known as the Standard Chartered Bank, and though it has a London head office, the bank does virtually no domestic business in the UK. By 1914, the Deutsche Bank had outlets around the world, and German banks had 53 branches in Latin America. The Societe Generale de Belgique had branches in the Belgian African colonies, and the Mitsui Bank established branches in Japanese colonies such as Korea.
All of these banks were “colonial” commercial banks because their primary function was to finance trade between the colonies and the mother country. Branches were normally subject to tight control by head office. Their establishment is consistent with the economic determinants of the MNE, discussed earlier. Branches meant banks could be better informed about their borrowers engaged in colonial trade. Since most colonies lacked a banking system, the home country banks’ foreign branches met the demand for banking services among their colonial customers.
A number of multinational merchant (or investment) banks were established in the 19th century – good examples are Barings (1762) and Rothschilds (1804). They specialized in raising funds for specific project finance. Rather than making loans, project finance was arranged and stock was sold to individual investors. The head office or branch in London used the sterling interbank and capital markets to fund the project finance these banks were engaged in. Capital importing countries included Turkey, Egypt, Italy, Spain, Sweden, Russia, and the Latin American countries. Development offices associated with the bank were located in the foreign country. Multinational merchant banks are also consistent with the economic determinants of the MNE. Their expertise lay in the finance of investment projects in capital poor countries; this expertise was acquired through knowledge of the potential of the capital importing country (hence the location of the development offices) and by being close to the source of supply, the London financial markets.
There was rapid expansion of American banks overseas after the First World War. In 1916 banks headquartered in the USA had 26 foreign branches and offices, rising to 121 by 1920, 81 of which belonged to five US banking corporations. These banks were established for the same purpose as the 19th century commercial banks, to finance the US international trade and foreign direct investment of US corporations, especially in Latin America. In the 1920s, these banks expanded to Europe, in particular Germany and Austria. By 1931, 40% of all US short – term claims on foreigners were German.
A few American and British banks established branches early in the 20th century, but the rapid growth of MNBs took place from the mid – 1960s onward. Davis (1983) argued that in this period banks moved from a “passive” international role, where they operated foreign departments, to one where they became “truly international” by assuming overseas risks. However, such an argument makes ambiguous the distinction between the MNB aspect of international banks and trade in international banking services. As expected, the key OECD countries, including the USA, UK, Japan, France, and Germany, have a major presence in international banking.
 
HI
PLZ HELP FOR THE 100 MARK PROJECT ON MULTINATIONAL BANKS
THANK YOU

Hey dear, as you need information on multinational banks so i did a search and got some important information regarding multinational bank and would like to share it with you. So please download and check it and i am sure it would be useful for you.
 

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