Foreign banks

The number of foreign banks in London has expanded rapidly in recent years and there are now more than 300 of them. United States and Japanese banks are the most numerous. One reason why banks establish foreign networks is to meet the requirements of their customers’ international operations and this is particularly important

in these days of large multinational companies. There has also been a large increase in the practice of raising loans abroad by governments, nationalised industries, and large joint stock companies. Large sums of money now move from one international financial centre to another seeking either, higher interest rates or greater security against the loss in real value which occurs when a currency depreciates against other currencies. Foreign banks play an important part in the London Money Market.

It was during these decades that a new international banking system was developing. This system, often referred to as the eurodollar market or, more accurately, the euro-currency markets, proved a magnet to banks world­wide. All large banks, as well as many medium-sized ones, sought to become involved. And while the euro-currency markets were truly international, with active dealing in many centres in Western Europe and elsewhere. London was, and still remains, the single most important centre. So it was to London that most foreign banks went, when they decided to compete for a share of the new international banking business, although, naturally, the larger banks also established offices in other important centres of the market as well.

For present purposes it is sufficient to note that virtually all of the foreign banks have as their main business wholesale banking in foreign currencies, and that much of this business is conducted with companies, persons and banks outside the UK. Having come to London primarily to do international banking, many of the foreign banks have, nonetheless, been ready to compete for domestic business as well. In a small number of cases, foreign banks have opened offices in provincial centres, such as Birmingham or Manchester.

IX. After reading the following dialogue translate the passages concerning recent changes and the range of services provided by the bank:

Presenter:	Clive Regis is interviewed about his bank's organization.
Interviewer:	First of all, could you tell me how you’re organized?
Clive:	Yes, certainly. Just to give you the background, we were established as a merchant bank as long ago as 1869. We operated independently as one of the major merchant banks in the City until 1976, when Metropolitan and Provincial acquired a one third interest in us, and as of last year we are now a wholly-owned subsidiary of that bank.
Interviewer:	Oh, really? I didn't realize that.
Clive:	Mmm. One of the consequences of our acquisition was that we sold off our non-banking related activities, though of course we still cover a full range of international banking services. Now in terms of management structure, we have an Administration Division which looks after all administrative matters. These include planning, group financial control, accounting and audit, computer services, legal services, personnel, premises and so forth.
Interviewer:	Ah, yes. That's cost centre services then?
Clive:	That's cost centre services, right. Next we have the Banking Division and they deal with loans, syndicated loans, project finance, overdrafts, documentary credits and correspondent hanking.
Interviewer:	I see.
Clive:	We're very active in the markets and so therefore we have a Dealing Division. They cover foreign exchange, currency options, money market transactions, bonds, floating rate notes, Eurodollar CDs,...
Interviewer:	CDs?
Clive:	Certificates of Deposit.
Interviewer:	Oh, I see. Yes.
Clive:	CDs, financial futures and bullion. Then there's our Corporate Finance Division which has expanded quite rapidly over the last couple ot years. They provide advice to a large number of UK and international companies. The activities of the Corporate Finance Division include mergers, takeovers, acquisitions and divestments, as well as stock marker and USM flotations in London, and of course capital raising.
Interviewer:	Mmm, I see.
Clive:	We also have an Investment Management Division which provides services to companies: pension funds, investment trusts, unit trusts and offshore funds. And finally there's a Leasing Division which organizes leasing packages for lessors and lessees. Well, that's who we are, and what we do. I think that sums it up.
Interviewer:	Ah, yes indeed. Now if we could move on to the...
Presenter:	That was Clive describing the structure of a merchant bank in London.

X. Study the divisions of the bank and their areas of responsibilities:

Administration Division Planning Group financial control Accounting and Audit Computer services Legal services Personnel Premises

Banking Division Loans, syndicated loans Proiect finance Overdrafts Documentary credits Correspondent banking

Dealing Division Foreign excnange Currency options Money market transactions Bonds Floating rate notes Eurodollar CDs Financial futures Bullion

Corporate Finance Division Mergers Takeovers Acquisitions Divestments Stock market and USM flotations Capital raising

Investment Management Division Companies Pension funds Investment trusts Unit trusts Offshore funds

Leising Division Packages for lessois and lessees

XI. Look at the terms in the left-hand column. Match each one with its correct definition in the right-hand column:

1) merchant bank 2) clearing bank 3) wholly-owned subsidiary 4) accounting and audit 5) syndicated loan 6) overdraft 7) documentary credit 8) correspondent banking 9) currency options 10) bonds 11) floating rate note 12) Eurodollar CDs 13) financial futures 14) merger 15) takeover 16) divestment 17) USM flotation 18) investment trust 19) unit trust 20) offshore funds

1) The selling-off of interests. 2) A very large loan for one borrower, arranged by several banks. 3) Money overdrawn on bank accounts to agreed limits. 4) Documents promising to pay sums of money at specified times. 5) Money placed in countries with very low taxes. 6) The joining of two or more companies into one. 7) A bank which is a member of a central organization through which cheques are presented for payment. 8) Activities were one bank acts as an agent for another bank. 9) A contract where the buyer has the right to demand purchase or sale of a specified currency, but no obligation to do so. 10)A bank mainly concerned with the financing of international trade. 11)An organization which collects and pools money from many small investors and invests it in securities for them. 12)A company entirely owned by another company. 13)A limited company formed to invest in securities. 14)A method of financing international trade where the bank accepts a bill of exchange from the exporter for the invoice amount, in return for receipt of the invoice and certain shipping documents. 15)The buying of the majority of the shares of companies. 16)Contracts to buy or sell currencies, bonds and bills, etc. at a stated price at some future time. 17)Note on which interest rates are fixed periodically, and which can be traded on the market. 18)Document given for a deposit repayable on a fixed date, the currency being dollars which are deposited outside the USA. 19)The keeping of financial records and their periodic examination. 20)The starting of a new limited company, where the shares are not included in the official list on the Stock Exchange.

XII. Scan the following text in about 100 words. Give the proper title to the text:

Banks provide a wide variety or services to companies, and a company operating internationally is likely to use several banks around the world to meet its various needs. Banks keep in touch with these customers by telephone and perhaps with regular meetings, to maintain the relationship and to market new services.

Most companies use banks at one time or another to finance their operations. As with any other type of loan, hanks charge interest on corporate loans. Interest rates for loans in Britain, for example, can be charged in one of three ways:

- at a margin above the bank's base rare. Each bank decides its own base rate, and then charges the company a rare of interest which is related to this. A big customer with a very good reputation may be charged the bank's base rate plus 0.5%, for example, while a smaller company might be charged the base rate plus 3%;

- at a margin above LIBOR, the margin again depending on the bank's assessment of the corporate customer.

- at a fixed rate of interest for the period of the loan.

The first two ways are variable and are adjusted periodically to reflect movements in interest rates on the market. They may also lie negotiable. The third may be dangerous for the bank when market rates are erratic.

A company involved in a business where income and expenditure are subject to constant changes needs a variable borrowing facility. This is met most simply by an overdraft facility. The company opens an account with the bank, and an overdraft with a specified limit is grained on the account.

A standby letter of credit is a commitment under which a bank agrees to provide funds to a customer where, unlike most other forms of documentary credits, no goods are involved. The standby letter of credit is a flexible form of lending and can cover a variety of situations, in which procedures are reduced to a statement of the documents to be received before payment is made to the third party-Many companies make a profit not only from the goods or services which they sell, but also from the money that they have. Cash managers utilize funds at their disposal, buying and selling shares, treasury bills and so on, to generate profit in the form of investment income. Rather than move valuable foreign shares and securities around the world by post, a company will deposit them for safe keeping with a bank in the foreign country. A company in Sweden which buys shares on the American marker, for example, will use the custodian services of a US bank. Banks naturally charge tees and/or commissions for custodian services.

XIII. Read the following information:

  Bank B provides services for Company C. Principally, these are as follows:   1. Standby letter of credit. The charge is ³/₄% on the outstanding volume. The average outstanding volume last year was £400.000. 2. Overdraft facility, with a limit of £2 million. The charge is Bank B’s base rate (10%) plus ³/₄%. The average overdrawn amount last year was £ 500.000. 3. Custodian services. Company C pays £50 per equity transaction. Last year there were 550 such transactions.

Work in pairs, one person representing Bank B and the other representing Company C. If you represent Bank B, look at the following instructions.

Bank B: You have some news for your customer: your bank’s base rate is being increased by ¹/₂%. Your margins in general are about right – you could afford to decrease them a little, but not only too much.

If you represent Company C, look at the following instructions.

Company C: Your company is becoming very cost conscious. You have been through Bank B’s charges with your boss, and he wants you to reduce them overall by at least 10%. See what you can do.

Negotiate in accordance with your instructions.

What factors are important for the financial success of a bank operating internationally? Look through the list of factors below and when you have decided on their relative order of importance, write the number of your choice in column A. Number 1 should show the factor which you consider most important and number 10 the least. You will be told how to fill in column B.

	A	B
Use of advanced technology
Strong national economy
Skilled and efficient staff
Wide range of high quality products
Broad network of correspondent banks
Good management
Wide geographical spread of local representation
Good market reputation
Established and diverse customer base
Other (specify)

Дата добавления: 2014-12-29