International Banking Definition with Types of Banks

Learn about the definition of international banking, as well as about the various types of such banks that are operating today, serving customers around the globe.

What is International Banking Definition

Simply put, an international bank is one type of bank with presences over international borders. It is a type of financial system offering various types of financial services. Such services include loan opportunities to and payment accounts for overseas customers. Basically, these banks clients may include individuals as well as companies. However, each international bank has their own policies regarding customers. So, they pick and choose with whom they wish to conduct their business. Read about the different types of banks below. These include correspondents, subsidiaries, front-end operations, and offshore.

Types of international banks:

International banks may be classified according to the products and services offered. Not all of them provide the same international banking facilities. Basically, retail banks provide their customers with banking facilities like savings account deposits and withdrawals, as well as currency-finance banking services. When they begin offering the option of investing in the world markets, they are then becoming internationalized. This is done through the incorporation of the features of an investment bank.

1. Correspondent Banks

This involves the relationships of at least two banks, including foreign banks located in different countries. Multinational corporations (MNCs) heavily rely on international banks to supply their correspondent banking services. These banks are however typically of a smaller scale.

They typically have representatives who service their customers from outside of the home country. They deal with transfers coming in from overseas sources. You can read more about the correspondent banking relationships and banking activities here.

2. Subsidiaries and Affiliates

A branch bank is established in a single country, but is owned by the parent bank in a foreign country. Such ownership is both wholly and partly held. An affiliated bank is like the first one, for the most part. The only difference is it may be run autonomously. Its ownership is not entirely tied to its parent, either. You may want to look at to find out about the bank’s affiliate programs.

3. Edge Act Banks

Some U.S. banks operated as Edge Act banks, under a constitutional amendment in 1919. They do international business with federal charters. At the same time, they are physically located in the U.S and operate under US banking law. However, they are subject to certain Federal Reserve surveillance since they are engaged in international banking. You can find out more from Edge Act Corporation on banks like this.

4. Offshore Banking Center

Offshore banking centers are a type of banking system that operates in order to service customers from other countries, beyond national boundaries. To do so, they permit accounts and banking transactions in foreign financial institutions. They do not offer checking or savings accounts to locals as do commercial banks.

These banks provide services and products that are specific for residents of a different country. They are also independent from foreign banking regulations, including central banks. Their transactions, however, are subject to the controls on money laundering. The Swiss bank is the best example of offshore banking centers.

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