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Text 13. How Banks Choose Overseas Offices

Traditionally banks have initially moved into external markets with an agency or a representative office because of the relative ease with which they can be established. The most important factor affecting the choice of type office is the attitude of the host country as reflected in its laws, regulations and policies towards financial institutions. Some countries prohibit foreign commercial branches; others prohibit foreign-held subsidiaries (or affiliates). And, of course, some governments exclude both foreign branches and subsidiaries. In other instances, entry of new firms is prohibited, but outside firms already in existence are permitted to function under grandfather provisions*. Over a dozen foreign countries permit no foreign commercial banking except for representative offices; only a small amount of trade is conducted with these countries.

In some cases, the policy of the home country of the parent bank may determine or at least influence the type of office established abroad. In at least a few instances, certain types of overseas office are not permitted by the government of the parent company.

Generally, branches are easier to establish than a subsidiary in a foreign country and they afford the parent company the greatest degree of control. Accordingly, as full service types of offices, branches play a key role in external operations. The type of office a bank establishes abroad also depends upon the extent of market participation desired by the bank, the amount that can be invested in the facility, and the availability of trained and talented staff.

*It means that companies already in existence at a certain date are allowed to continue, but no banks can set up after that date.

Exercise 98 . Answer the questions.

1. Is the host or parent country usually more important in influencing the type of overseas office which is set up? 2. Which types of overseas offices do banks often have? Why? 3. Which type of overseas office gives the parent company most control? 4. What are five different attitudes of host countries to foreign banks? 5. What advantages do foreign branches have over foreign subsidiaries?

Exercise 99. Delete the words which, according to the text, are wrong in the following sentences.

    1. Home country regulations (sometimes / never) affect the establishment of foreign banking offices.

    2. Generally (all / most) types of overseas representation are permitted by parent company governments.

Exercise 100. According to the text, which of the following factors do not affect a bank’s choice of overseas office? (more than one answer is possible)

      1. The availability of subsidies from overseas governments.

      2. The funds that the parent company can spare.

      3. The existence of the right type of employees.

      4. How much experience of overseas banking the parent company has.

      5. The degree to which the parent bank wishes to penetrate the foreign market.

Exercise 101. Using one word in each gap, complete the following summary of the text. All the necessary words are in the text.

In the past banks have first entered foreign markets by means of an ____ or a _____ office. Which type of office was chosen depended on the attitude of the _____ country. According to its laws, ______ and policies different types of office may be ______. Grandfather _____ sometimes allow long-established banks to ______. More than twelve countries allow only _______ offices.

Sometimes the home country of the ______ bank may forbid certain forms of _______ offices.

On the whole _______ are easier to set up than a ______ and also allow more ________. Because they also offer ________service, foreign branches are very important.

Exercise 102. Learn the following words and word combinations.


  • “стартап”, нещодавно створена компанія


  • засновник


  • обережний, не готовий ризикувати

venture capital/ risk capital/

start-up capital

  • венчурний капітал; ризиковий капітал

high net worth individual

  • заможна приватна особа

angel investor

  • бізнес-ангел ( особа, яка вкладає кошти у молоду компанію або ризикований проект, який може принести більший дохід, ніж традиційні інвестиції)


  • підприємець

rate of return

  • дохід на капітал; ставка доходу

public company

  • відкрита акціонерна компанія

exit strategy

  • стратегія виходу (з компанії, бізнесу); стратегія вилучення капіталу

mezzanine financing

  • проміжне фінансування

convertible bond

  • конвертована (в акції) облігація

preference shares (BrE)/

preferred stock (AmE)

  • привілейована акції, акції з фіксованими дивідендами

private company

  • закрите акціонерне товариство

Exercise 103. Read, translate and give the gist of text 14.

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