International Banking

Banks have been heavily involved in selling their services acrossnational borders from the industry’s very beginning. The first banks werelocated principally in global trading centers around Mediterranean Sea,including Athens, Cairo, Jerusalem and Rome, aiding merchants in financing shipment of raw materials and goods for sale and exchanging onenation’s currency and coin for that of another to assist travelers as well aslocal merchants.

Nowadays international bankers faceunprecedented challenges in both raising and allocating funds. Gerald Corrigan,president of the Federal reserve Bank of New York, perhaps has best capturedthe essence of today’s global bank management problems: “Financial markets and institutions are caught up in an unprecedentedwave of change and innovation whichmakes it very difficult to distinguish ends from means, causes from effects,and actions from reactions”.

Credit – transactions between two parties in which one (the creditor orlender) supplies money, goods, services or securities inreturn for a promised future payment by the other ( the debtor or borrower).Creditor is someone who money is owedto.Debtor is someone who owes money.Creditgiven is an indication of trust in that person to pay for the goods given ormoney lent. Credit transactions normally include the payment of interest to thelender. Credit may be extended by public or private institutions to finance businessactivities, agricultural operations, consumer expenditures or governmentprojects. Most modern credit is extended through specialized financialinstitutions, of which commercial banks are the oldest and more important. Thelender must judge each loan he makes on the basis of the character of theborrower, his capacity to repay and his collateral. Loan is an amount of moneythat you borrow from a bank. Customers lenders may publicly regulate the termsof credit transactions to prevent abuses.

The price system

Who tells workers where to work orwhat occupation to choose? Who declareshow many cars should be produced and how many homes should be built? Whospecified the predominant style of women’s dress or men’s suits?

The greater the degree of competition the morethese matters are decided impersonally and automatically by the price system orthe market system. This may view as a system of rewards and penalties. Rewardsinclude profits for firms and people who succeeds. Penalties include losses, orprobably bankruptcy, for those whofails. The price system is fundamental to thetraditional concept of market economy.

The price system basically will operate on theprinciples that everything that exchanges – every good, every service and everyresource – has its price. In a free market with many buyers and sellers, theprices of these things reflect the quantities that sellers make available andthe quantities that buyers wish to purchase.

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