Chapter 15 - Regulation of financial institutions. This chapter focuses on the major regulations that affect financial institutions, especially commercial banks. Regulations have a major impact on how financial institutions are managed, how they deal with consumers, the types of products they offer, the structure of the industry, and the types of risks they take. | Power Point Slides for: Financial Institutions, Markets, and Money, 9th Edition Authors: Kidwell, Blackwell, Whidbee & Peterson Prepared by: Babu G. Baradwaj, Towson University and Lanny R. Martindale, Texas A&M University CHAPTER 15 INTERNATIONAL BANKING Development of International Banking International banking dates back to the rise of international trade. Great Britain dominated international finance until after WW II. American banks entered international finance after 1914. The Edge Act (1919) Federal Reserve Act of 1913 permitted foreign branches. Agreement corporations were legalized in 1916. Details of the Edge Act Banks able to create federally chartered subsidiaries located in the United States Participated in international banking Could make equity investments . banks able to compete with European banks Grew in number and activities after WW II Reasons . Banks’ Global Expansion Increased expansion of . trade and foreign markets. Growth of multinational corporations. . government business regulation limited . profit opportunities. Need to finance petroleum induced deficits in foreign countries. Recent Activity in . International Banking Growth slowed in the early 1970s. . regulations limiting the outflow of funds to foreign countries were eliminated. Smaller banks could not compete with larger international operations. International lending increased in 1974. OPEC increased oil prices. Oil producers and oil importers had surplus/deficit funds flow to invest or finance. Recent Activity in . International Banking While fewer . banks operate overseas, they have a larger network of global affiliates in the form of branches, overseas offices, and most importantly through correspondent banks. Since the 1990s, fewer, but larger . banks are operating globally. Two of the largest banks in the world are . banks – Citigroup & J. P. Morgan. World’s Largest Banks (2002) World’s Largest Banks (1990) . | Power Point Slides for: Financial Institutions, Markets, and Money, 9th Edition Authors: Kidwell, Blackwell, Whidbee & Peterson Prepared by: Babu G. Baradwaj, Towson University and Lanny R. Martindale, Texas A&M University CHAPTER 15 INTERNATIONAL BANKING Development of International Banking International banking dates back to the rise of international trade. Great Britain dominated international finance until after WW II. American banks entered international finance after 1914. The Edge Act (1919) Federal Reserve Act of 1913 permitted foreign branches. Agreement corporations were legalized in 1916. Details of the Edge Act Banks able to create federally chartered subsidiaries located in the United States Participated in international banking Could make equity investments . banks able to compete with European banks Grew in number and activities after WW II Reasons . Banks’ Global Expansion Increased expansion of . trade and foreign markets. Growth of multinational
