Why Banks Go International

Document Type:Essay

Subject Area:Finance

Document 1

The globally outlook comes with varied benefits and as it is well known the global markets presents a lot more opportunities. The most affected financial institutions in this area are the retail and commercial banking sectors. The retail banking systems is purely progressive based on the number of clients served in certain geographical area. that means internationalizing their operations, opens up doors for a wider customer base. Due to the relational factors and currency market changes, such banks enjoy different economies. As a result, most clients trust international banks by believing they can’t shut down overnight, and that their money is available to them, whenever they travel. International banking is one trading mechanism to overcome the financial challenges and competition that may be presented by the home markets5.

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In as much as home markets are relevant in the basis of growth, they do not avail the opportunities of large scale operations that come due with international markets. The process of joining the international markets however requires a more solid analysis on choice of countries to venture – including the marketing capability, the growth rate, the government influence, the taxation among many other trading conditions that the targeted nation presents. If the installation of the banking unit goes through, it is bound to be followed by intense product promotion, so as to win a good client base. 7As most infrastructural development based firms scramble to be identified by some bank and develop a strong partnership levels, there is a rising competition that later leads to a growing need for new markets.

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Chances that the domestic market gets saturated by the completion is high, and so the only chance is to the ventures outside the borders. In a bid to stabilize the growing needs of the banking infrastructure there is development of more regional units of banks in different nations8. Only then can they counter the competition form home. It is imperative to recognize the value of good international relations between the home country and the projected country of investment. The strategy is also completely reliable to the bilateral trade between the two countries. The socio-economic environment plays a role in ensuring that a market is potentially reliable for banking developments. In war ton countries, investment is hampered and money markets suffer most10.

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Similarly, in unstable political environment, investment is practically impossible. The harsh geopolitics are not worth risking an investment processes that carries its own risks as well. It is the due capacity of every banking institution to either create their presence on the international money markets or at least gain from the forex trade if at all it doesn’t dominate the system. A better analogy at explaining this would be the internet connectivity. When the home Internet service Provider is also a global service provider, the services are cheaper with lots of opportunities and customer support mechanisms. The wider connection presents more links to the outside world, making exploring the outside world venture a more intuitive and interactive event than never before.

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Similarly, the concept applies for an international banking system that rakes in more customers through linking many nations together. 16This very investable in a case where the banking system is private and has no power over changing economic policies that would help see fast rate expansion. The expansion of banking facilities is mostly affected by the home country economic growth – of course because they operate domestically. That means the policies being made by the political powers affects the banking system directly. For instance, the national debts and the GDP levels determines directly how a bank operates. Domestic banks are chiefly limited to trade in domestic currency, which of course limits the capacity to become more relevant to the competing world. In general analysis, other reasons may include saturation of the home markets, which may make the banks to go for more clients outside their base country.

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Some countries may also provide investor friendly incentives, that may lead to international external banks scrambling for an opportunity to create their presence in the stated country. Internationalizing banking institutions appears more lucrative for the investing banks. If a reliable and effective feasibility study is done and a proper marketing strategy deployed in place, there is exponential growth attributed to good management. References Buch C, 'Why Do Banks Go Abroad?-Evidence From German Data' (2000) 9 Financial Markets, Institutions and Instruments Chotigeat T, S KramerC Pyun, 'Efficiency And Resilience Of French Multinational Banks: Evidence From The Pre‐Euro Era' (2004) 12 Multinational Business Review Frey R, 'Multinational Banks’ Deleveraging In The Global Financial Crisis' (2016) 37-38 Journal of Multinational Financial Management Garcca-Herrero A, 'Why Banks Go To Emerging Countries And What Is The Impact For The Home Economyy A Survey' [2006] SSRN Electronic Journal Gulamhussen MI Lavrador, 'Internal Capital Markets And The Funding Of Subsidiaries Of Multinational Banks' (2014) 17 International Finance Kosmidou K, F PasiourasA Tsaklanganos, 'Domestic And Multinational Determinants Of Foreign Bank Profits: The Case Of Greek Banks Operating Abroad' (2007) 17 Journal of Multinational Financial Management Kowalewski O, 'Multinational Banks And The Performance Of Their Subsidiaries Abroad' [2010] SSRN Electronic Journal Lehner M, 'Entry Mode Choices Of Multinational Banks' [2008] SSRN Electronic Journal Meero A, 'The Relationship Between Capital Structure And Performance In Gulf Countries Banks: A Comparative Study Between Islamic Banks And Conventional Banks' (2015) 7 International Journal of Economics and Finance Merz JM Overesch, 'Profit Shifting And Tax Response Of Multinational Banks' (2016) 68 Journal of Banking & Finance Misati RA Kamau, 'Local And International Dimensions Of Credit Provision By Commercial Banks' (2017) 12 Banks and Bank Systems Navaretti G and others, 'Multinational Banking In Europe - Financial Stability And Regulatory Implications: Lessons From The Financial Crisis' (2010) 25 Economic Policy.

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