Type: Business
Pages: 3 | Words: 675
Reading Time: 3 Minutes

It is a reality that international banking has gained popularity in the recent past. Many people from across the globe are continuously going global in terms of financial transactions. In other words, the single global banking space is almost a reality. The internationalization of banking started in the 1970s, paving the way for the “˜globalization’ of finance as well as becoming more and more evident in the 1990s as global capital flows rose in magnitude (Goldstein 57). Basically, the increased banking activities at the international level have been facilitated by the increased communication and information technology revolution and capital flows have continuously responded to economic and political news (Goldstein 64). Notably, this development has created the potential for increased global financial and consequent economic changes. That is, the globalization of banking activities has its advantages and disadvantages as far as the recent developments have affirmed. This paper seeks to explore advantages and disadvantages of international banking.

Advantages of international Banking

By engaging countries of all backgrounds including developed, developing, those in transition or emerging market economies, to draw on the international capital pool to finance investment, instead of depending solely on the domestic sources of income may, a global financial system may provide great opportunities to the people or nations involved. What is really so special about the international banking opportunities? Basically, an international bank refers to a financial entity that provides financial services, e.g. payments accounts, lending services and other financial opportunities to foreign clients (Mullineux & Murinde 6). In the recent developments, the foreign clients have increased in scope and cover such groups as individuals, companies, and other international as well as domestic organizations. But each international bank has its own policy guideline that define whom they would do business with in the international financial transactions (Mullineux & Murinde 9).

International banking services have helped companies and individuals to facilitate international business. In this case, the international company would not have to set up several bank accounts all over the globe or in different countries, and then wait to receive the money while the banks do transactions between themselves (Mullineux & Murinde 24). Moreover, companies would find it easy to deal with international banking in order to increase their chances of borrowing from them. The good thing about borrowing from an international banking is that they are less affected by the domestic interest rate fluctuations. For instance, when one wants to avoid the reducing interest rates in their own country, the first thing he or she would do is transfer his or her money into the international bank. Additionally, some international banks do offer better interest rates for the deposited money than the locally based banks, thus providing an opportunity to increase financial base for the companies as well as individuals. Finally, international banking helps businesses facilitate international trade by offering several services to their global clients. For example, they offer letters of credit to ensure that companies from different countries honor their payment agreements to each other (Mullineux & Murinde 8). Additionally, it helps businesses that face large costs of importing and exporting products to acquire financial services with ease.

Disadvantages of international Banking

Even though international banks have helped facilitate global businesses, the present happenings have shown that international banking has its lows, and may cause instability in various ways. The most frequent problem emerges from the fact that corrupt individuals such senior government officials have used international banks to hide stolen public funds. This has generally affected mainly the developing nations in Asia and Africa. Secondly, just like local currency would change value, so can foreign currency (Mullineux & Murinde 32). Investing in the international bank would definitely lead to loss of money if the international currency losses value. Furthermore, if one engages in an investment in the international bank, the profit may just be so low especially if one converts the money to the less performing local currency. Lastly, international banking has been used by individuals and companies to evade tax in their countries; increased the chances of money laundering; and facilitated terrorism activities.

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