- •Unit VI. Finance. Money and credit
- •Text 1. Financial Literacy
- •Text 2. Money
- •Text 3. Evolution of the Payments System
- •Text 4. What is Money Supply?
- •Text 5.The Banking System of Ukraine
- •Text 6. Personal Banking
- •Text 7. Commercial and Retail Banking
- •Text 8. Central Banking
- •Types of Bank
- •Text 9. Interest Rates
- •Text 10. What Is a Loan?
- •Text 11. Money Transfer
- •Text 12. Investment Banking
- •Text 13. How Banks Choose Overseas Offices
- •Text 14. Venture Capital
- •Text 15. Stocks and Shares
- •Text 16. Futures
- •Text 17. Foreign Exchange
- •Text 18. How Is Foreign Exchange Traded?
- •Text 19. Financing International Trade: The Letter of Credit
- •Text 20. Finance and Insurance Institutions
- •Text 21. Insurance
- •Text 22. Aircraft Finance
- •Islamic leasing
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.
Home country regulations (sometimes / never) affect the establishment of foreign banking offices.
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)
The availability of subsidies from overseas governments.
The funds that the parent company can spare.
The existence of the right type of employees.
How much experience of overseas banking the parent company has.
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.
start-up |
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founder |
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risk-averse |
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venture capital/ risk capital/ start-up capital |
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high net worth individual |
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angel investor |
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entrepreneur |
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rate of return |
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public company |
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exit strategy |
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mezzanine financing |
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convertible bond |
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preference shares (BrE)/ preferred stock (AmE) |
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private company |
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Exercise 103. Read, translate and give the gist of text 14.