Question

Question about International Financial Management

What size of banks are involved in import/export work? Where do thing they are located?

Answer 1

International business is surrounded by risk, especially if you do not have the required information and the right guidance before venturing into it. Without commercial banks, the international finance and import-export industry would not exist. Commercial banks make possible the reliable transfer of funds and translation of business practices between different countries and different customs all over the world. The global nature of commercial banking also makes possible the distribution of valuable economic and business information among customers and the capital markets of all countries. Commercial banking also serves as a worldwide barometer of economic health and business trends.

Some small commercial banks limit their reach to the local business community; but as business has gone global, so have commercial banks. Large banks such as Citigroup, Bank of America and Chase are retail (consumer) banks that also maintain full commercial banking activities in the United States with branches in many countries. These larger banks may act as affiliates of smaller banks that do not have branch presences in other countries. Through foreign branch banking, U.S. based multinational companies can consolidate their financial business at a single bank that handles their trade finance, currency transactions, project loans, payroll, cash management investments and deposit accounts throughout the world. Commercial banks also arrange deals between their customers globally, including strategic partnerships and project fulfillment agreements.

Commercial banks doing international business are also called merchant banks because they finance trade between companies and customers located in different countries. This is done by issuing LOCs that indicate the customer has deposited the full amount due on an order with a company located in a different country. The seller company can then feel assured of being paid if it ships goods to its offshore customer. The LOC may also be used by the company to guarantee a manufacturer’s loan, allowing it to finance the manufacture of the goods to be delivered. Without LOCs, companies would face considerable expense in investigating their foreign customers to make sure they are legitimate and creditworthy, and complying with laws and regulations of the different countries in which they do business.

In order to facilitate international trade and development, commercial banks convert and trade foreign currencies. When a company is doing business in another country it may be paid in the currency of that country. While some of these revenues will be used to pay workers in that country and for administrative expense such as office rent, utilities and supplies, the company may need to purchase goods from a neighboring country in that country’s currency, or convert cash to its native currency for return to the home office.

Companies always need to borrow money to cover purchases of raw materials, machinery parts, inventory and/or payroll. Banks with overseas branches or affiliates can simplify the process of corporate finance throughout a company’s organization by consolidating the transaction procedures, reporting and record keeping. It is much easier for a company manager to do business in her own language with a banker located nearby who handles her global business finance needs than it would be for her to develop banking relationships in every country where she does business. Her international commercial bank can also provide referrals to professional service firms in other countries, as well as arrange introductions to other companies appropriate as customers or for strategic partnerships.

The Export-Import Bank Of The United States (Ex-Im Bank) was created in 1934 by Congress, and operates under a charter which is periodically reviewed by Congress. It is a federal agency whose mission is to support American jobs through facilitating exports of goods and services. The Ex-Im Bank offers various forms of trade finance solutions, including insurance against foreign default (whether for commercial or political reasons), working capital guarantees, guarantees on letters of credit extended by foreign banks, and it provides loans to potential export purchasers. It also allows domestic businesses to take out loans backed by foreign receivables or foreign assets.

Examples of other commercial banks and their activities:

American Express has made a strong commitment to global trade. AmEx’s Global Commercial Payments division offers a variety of payment and lending products to help exporters with travel and everyday business spending, cross-border payments, global currency solutions and business financing. Among AmEx’s offerings are its vPayment service, where users get a single-use virtual account number that they can use to pay suppliers electronically; FX International Payments, an American Express online platform that lets businesses send, receive and manage their foreign currency wire payments; and Buyer Initiated Payments, which lets companies pay suppliers electronically and helps them extend their working capital.

Among the big global banks, Bank of America Merrill Lynch aims to stand apart by applying dedicated resources from its Global Trade Finance team to support mid-sized companies with programs such as supply chain financing.

BARCLAYS - Operating in 40 countries, this London-based bank offers a full array of services to those who hope to branch out from U.S. markets. The bank offers trade solutions such as financing, letters of credit, a letters of credit discounting service that speeds payments from customers, trade collections, trade finance—including export credit agency financing—and trade loans. The bank also offers bonds and guarantees. A global trade portal enables customers to manage their trading activities online. Barclays has a location in New York City that serves the U.S. export market.

BB&T bbt.com - With extensive experience in working with the Export Import Bank of the U.S. and the U.S. Small Business Administration, BB&T offers a range of programs to help exporters finance export sales, get protection against non-paying clients and use foreign receivables as collateral. The bank offers three kinds of export credit insurance: single-buyers export credit insurance, small business export credit insurance and multi-buyer credit insurance. Documentary services include export letters of credit and international standby letters of credit.

BNP PARIBAS - Giant global bank BNP Paribas–owner of BancWest Corp., a holding corporation for Bank of the West and First Hawaiian Bank–has a network of 100 trade centers in 60 countries, where exporters can work with International Service specialists who offer access to a full spectrum of international import and export services in many languages and currencies. One unique offering: A Trade Finance App that lets exporters manage international standby letters of credit and keep up with trade finance transactions. Through BNP Factoring, BNP offers factoring services, and the bank is a member of factoring networks Factors Chain International and International Factors Group, which offer factoring in a buyer’s country for exporters.

Other such examples include BNY MELLON, CITIGROUP, COMERICA BANK, DEUTSCHE BANK Etc