International trade financing: International banks are the leading source of credit for multinational corporations and many governmental units. They provide both st & lt financing.

Most international bank loans are ST, carrying floating interest rates usually tied to some international base rate. The most popular is LIBOR on borrowings of short-term Eurodollar deposits between banks.

The int. banks are essential through the offering of payment and thrift instruments. The example of such transaction could be a letter of credit, which guarantees that a bank will pay an exporter of goods and that the importer will do so. The example of thrift operation will be CDs (Certificate of Deposit) – interest-bearing receipt for funds deposited in a bank.

The recently new and popular type would be also the Export Trading Company (ETC), especially popular in Japan. They do research in foreign markets, find the potential customer to the client and then arrange the funding, insurance and transportation needs. These ETCs have been developed by leading money center banks in USA.

Participation in the interbank foreign exchange and eurocurrency markets: International banks supply foreign currency to their customers. Many customers require sizeable quantities of spendable currencies. Other customers may receive large amounts of foreign-currency or foreign-currency-denominated deposits from businesses and individuals abroad. These foreign funds must be exchanged for domestic currency and deposits to help the customer meet his own cash needs. Int. banks hold working balances of those foreign currencies most in demand.

The international banks assist in the performance of the following operations in the interbank market: Transactions in the FOREX market can be executed on a spot (43%), forward (9%), or swap (48%) basis. Currency futures are used to obtain foreign exchange; however, unlike forward contracts, they are designed with standard amounts for standard delivery dates. Currency can also be obtained through currency call/put options.

Investment bankers (IB) are financial advisers to corporations, governments, and other large institutions. IBs provide critical advice and direction to their clients on such important issues as: raising capital, new m’t entries, M&As, IPOs, SPOs.

Main inv. banking service is security underwriting – the purchase for resale of new stocks, bonds, and other financial instrument in the money and capital market on behalf of the client who need to raise money.

Leveraged buy-outs (LBOs) have taken more importance in the past time. LBOs involve the acquisition of a company which are funded by large amounts of debt.

Sovereign lending refers to lending to sovereign governments, either directly to the government or government agency or to a company within the country where the loan is guaranteed by the government. This form of lending by banks grew rapidly following major oil price rises in 1973 and 1974. Oil producing countries placed their receipts on deposit in the eurocurrency markets and these funds were on-lent by banks, mainly to developing countries. The loans were mainly made with a floating rate of interest in US dollars.