CHAPTER NO.

1
INTRODUCTION TO INTERNATIONAL FINANCE

TOPICS:
Introduction Balance of payments Gold standard system Bretton woods system Present exchange rate systems Important entities of the world economy

Introduction:
All economies in the world carry out various transactions with each other which bears an economic value. The transaction can be one side transaction or two side transaction .at the same time transactions may be within the nation or between two different nations. When the transactions are between two different nations the system of recording the transaction is known as balance of payment.

Balance of payment:
It is a system of recording the international transactions. It is a double entry system of recording the transactions .As it is a double entry system ,it always tallies.

Gold standard system:

Bretton woods system:

The Bretton Woods Conference of 1944 established an international fixed exchange rate regime in which currencies were pegged to the United States dollar, which was based on the gold standard Since the end of World War II, the U.S. dollar has enjoyed a unique and powerful position in international trade. But perhaps no more.

Bretton woods system:

RESERVE CURRENCY GOLD OTHER CURRENCY

FRENCH FRANKS 1US$=119.1FFr

REAL GOLD IN STOCK OF MONEYTORY AUTHORITY

US DOLLAR

Italian lire 1us$=575 lire

Switzerland 1US$=43.77 S frank

FINLAND 1IUS$=320Markka

Bretton woods System:

Triffin's paradox:
The Triffin dilemma, less commonly called Triffin paradox, is the fundamental problem of the United States dollar's role as reserve currency in the Bretton Woods system, or more generally of a national currency as reserve currency.

Smithsonian Agreement:
Meeting in December 1971 at the Smithsonian Institution, the Group of Ten signed the Smithsonian Agreement. In the Agreement, the countries agreed to appreciate their currencies against the United States dollar.

Present exchange rate systems:

1.Fixed exchange rate system: 2.Free float exchange rate system: 3.Pegged with weighted average system: 4.Currency board: 5.co-operative union: 6.Adjustable peg:

Important driving entities of the world:

WTO IMF World Bank OPEC EU The US economy China Central banks and the governments of the respective countries OECD

CHAPTER:2 EVOLUTION OF INTERNATIONAL BANKING

TOPICS:
Introduction Internationalization of banks Motives for internationalization of bank Features of international banks Important events in international banking International banks in India Global competition in international banks

Introduction:
An international bank is a financial entity that offers financial services, such as payment accounts and lending opportunities, to foreign clients. These foreign clients can be individuals and companies, though every international bank has its own policies outlining with whom they do business. According to OCRA Worldwide an organization that matches people and companies to international banking . international banks tend to offer their services to companies and to fairly wealthy individuals, i.e., people with $100,000 and counting . But plenty of international banks, particularly Swiss banks, open their doors to customers of any income bracket .

The Bank for International Settlements (BIS) is an international organization ofcentral banks which "fosters international monetary and financial cooperation and serves as a bank for central banks".As an international institution, it is not accountable to any single national government.

Motives for internationalization of banks:

Migration of enterprise Optimization of cost of capital Diversification benefits Regulatory avoidance Expansion of bank custodial finance

Features of international banking:

Currency risk Complexity of credit risk Competition for market share among banks Cyclical nature with periodic crises Competition for bank loan from the international bond market Importance of international interbank market Role of risk management activities(swap)

Important events in international banking:

The 1973 energy oil crisis The 1982 international banking debt crisis The baker plan The Brady plan Basel-I East Asian financial crisis Basel-II

International banking in India:

International banking established in India since the years of independence. At present almost all the international banks are having their branches in India. their regulation is undertaken by FEMA(foreign exchange management act).

Important International banks in India:

Reserve Bank of India ABN AMRO Bank Abu Dhabi Commercial Bank Ahmedabad Mercantile Co-op. Bank Allahabad Bank Amaranth Co-operative Bank Ltd Axis Bank Andhra Bank Bank of India Bank of Baroda Barclays India Bank of Rajasthan,

Global competition in international banking:

European banks-solid capital base &healthy financial conditions

Japanese banksstrong technology

US banks-very strong banks(financially)

Chapter:3 Functional overview of international banking

Topics:
Foreign exchange market Foreign exchange market in India Functional overview of foreign markets Letter of credit Customer functions Treasury functions International banking departments

The foreign exchange market:

The market in which participants are able to buy, sell, exchange and speculate on currencies. Foreign exchange markets are made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors. The forex market is considered to be the largest financial market in the world.

Structure of foreign exchange market:

Wholesale market:
1.Giant layer market 2.Other layer market

Retail market:

Functional overview of international bank:

Customer related functions: a)trade finance b)International merchant banking c)Finance of project export d)Remittances

Letter of credit:
A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase.

Structure of international banking department:

Dealing room Dealing room environment Profile of a dealer Responsibilities of a dealer Working hours' of a dealing room