International Banking Definition and Types of Banks

Learn the definition of international banking and of the different types of these banks in operation today serving customers all over the world.

The International Banking Meaning

Manager explaining the international banking definitionSimply said, international banking is a type of banking that has presence across international borders. It is a financial system that offers financial services like lending opportunities and payment accounts to foreign clients. Basically, the clients of the these banks can be both individuals and companies. However, every international bank has its own policy of choosing who they can do business with. Read below about the various types of banks, including correspondent, subsidiary, edge act and offshore.

Types of international banking:

International banks can be categorized by the products and services they offer. Not all of them provide the same international banking facilities. Basically, retail banks offer bank accounts such as savings accounts deposits and withdrawals, as well as foreign exchange banking services to their customers. When they start offering an opportunity to invest in global markets then they become internationalized. This is done by incorporating investment banking features. International banking services can be classified into the following types:

1. Correspondent Banks

This involves a relationship between a minimum of two banks which includes those that are in different countries. Multinational Corporations (MNCs) greatly use international banks for providing them with their correspondent banking services. These banks are however usually small in size.  They generally have representatives that serve their customers out of their home country. They handle transfers from foreign source.

2. Subsidiaries and Affiliates

A subsidiary bank is incorporated in one country but it is owned by a parent bank in a foreign country. Such ownership is either completely or partially. An affiliate bank is similar in most ways to the former. The only difference is that it can operate independently, and its ownership does not rest completely with a parent company.

3. Edge Act Banks

Certain US banks operate as edge act banks based on the constitutional amendment of 1919. They conduct business internationally under a federal charter. At the same time they are physically located in the United States. They however fall under some monitoring by the federal reserve as they engage in international banking.

4. Offshore Banking Center

Offshore banking centers are a type of banking system in a country that allows foreign bank accounts. They are independent of the banking regulations of the country. They offer special products and services to residents of another country. Their transactions however fall under money laundering controls. The Swiss Bank is the best example of an offshore bank.

Learn More what is international banking: Contact us to get further information on the meaning of international banking system. Buy international banking definition books at amazon and learn even more.