We shall discuss only the role of central banks in international trade. Central banking refers to the role of a central monetary authority or an apex financial institution within the entire financial structure in promoting monetary stability and a sound financial system. Included, the world of central banks is one of variety of structures, functions and powers which are in themselves by products of the economic, political and other realities prevailing in a society.
Commercial banks offer services such as trade finance, project finance, payroll, foreign exchange transactions and trading, lock boxes for collecting payments and general corporate finance. Significance 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. Foreign Branch Banking 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.
Commercial banks also arrange deals between their customers globally, including strategic partnerships and project fulfillment agreements. Trade Finance 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. 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.
Foreign Exchange 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.
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.
Miscellaneous Banking Services Corporate checking accounts, currency specific credit cards and lock boxes are also offered by commercial banking to help make foreign trade possible for a company.
Lock boxes are particularly helpful for collecting payments from overseas customers and reporting receipts daily for cash management purposes. Currency-specific credit cards are also important in eliminating the cost of cross currency purchasing, which normally is done at expensive valuation levels.The availability of trade finance, particularly in developing and least-developed countries, plays a crucial role in facilitating international trade.
Exporters with limited access to working capital often. Banks play a critical role in international trade by providing trade finance products that reduce the risk of exporting. This paper employs two new data sets to shed light on the magnitude and structure of this business, which, as we show, is highly concentrated in a few large banks.
Importance of Trade Finance The availability of trade finance, particularly in developing and least-developed countries, plays a crucial role in facilitating international trade.
Exporters with limited access to working capital often require financing to process or manufacture products before receiving payments. Banks play a critical role in international trade by providing trade finance products that reduce the risk of exporting. This paper employs two new data sets to shed light on the magnitude and structure of this business, which, as we show, is .
The role of the World Bank in international trade policy. Author: Elina VIILUP. 1. 1 Introduction. The World Bank is an international financial The role of the World Bank in international trade policy 5 The World Bank Group’s influence on EU trade policy.
EU-WGB cooperation in the. THE ROLES OF BANKS IN INTERNATIONAL TRADE. ABSTRACT. This project work has critically highlighted the compact of the Role of Banks International Trade in Nigeria, the problems affecting the Role in Banks in international trade in Nigeria have been identified and how they can be controlled is also includes in the study and ways to solve them are inductive in the study.