Role of International Financial Institution known as (IFIS)

-Are financial institutions that have been used by more than one country.

-Their owners or shareholders are generally national governments

TYPES OF INTERNATION FINANCIAL INSTITUTION

- WORLD BANK
• TO END EXTREME POVERTY
• TO PROMOTE SHARED PROSPERITY

- ASIAN DEVELOPMENT BANK

• TO MAKE LOANS AND EQUITY INVESTMENTS
• TO PROVIDE TECHNICAL ASSISTANCE
• TO PROMOTE INVESTMENT OF PRIVATE AND PUBLIC CAPITAL

- ISLAMIC DEVELOPMENT BANK

• TO FOSTER THE ECONOMIC DEVELOPMENT AND SOCIAL PROGRESS
• TO PARTICIPATE IN EQUITY CAPITAL AND GRANT LOAN FOR PRODUCTIVE PROJECTS AND ENTERPRISES
• TO ESTABLISH AND OPERATE SPECIAL FUNDS

- INTERNATIONAL MONETARY FUND

• TO ENSURE THE STABILITY OF THE INTERNATIONAL MONETARY SYSTEM
• TO MONITOR THE ECONOMIC AND FINANCIAL POLICIES
• TO PROVIDE LOANS TO MEMBER COUNTRIES

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CAPITAL MARKET – SYSTEM THAT ALLOCATES FINANCIAL RESOURCES ACCORDING TO THEIR MOST EFFICIAL USES

DEBT: REPAY PRINCIPAL PLUS INTEREST

- BOND HAS TIMED PRINCIPAL & INTEREST PAYMENTS

EQUITY: PART OWNERSHIP OF A COMPANY

- STOCK SHARES IN FINANCIAL GAINS OR LOSSES

INTERNATIONAL CAPITAL MARKET – NETWORK OF PEOPLE, FIRMS, FINANCIAL INSTITUTIONS, AND GOVERNMENTS
BORROWING AND INVESTING INTERNATIONALLY

BORROWERS

- EXPANDS MONEY SUPPLY

 - REDUCES COST OF MONEY

LENDERS

- SPREAD/REDUCE RISK
- OFFSET GAINS/LOSSES

INTERNATIONAL CAPITAL MARKET DRIVERS

3 MAIN FORCES

- INFORMATION TECHNOLOGY
- DEREGULATION
- FINANCIAL INSTRUMENTS

OFFSHORE FINANCIAL CENTERS

COUNTRY OR TERRITORY WHOSE FINANCIAL SECTOR FEATURES FEW REGULATIONS AND FE, IF ANY, TAXES.

OPERATIONAL CENTER – EXTENSIVE FINANCIAL ACTIVITY AND CURRENCY TRADING

BOOKING CENTER – MOSTLY FOR BOOKKEEPING AND TAX PURPOSES

KEY FACTORS ARE DRING GROWTH OF THE INTERNATIONAL CAPITAL MARKET

1. THE USE OF INFORMATION TECHNOLOGY IS DRASTICALLY REDUCING THE COST OF GLOBAL COMMUNICATION.
2. DEREGULATION INCREASES COMPETITION, LOWERS THE COST OF FINANCIAL TRANSACTIONS, AND OPENS
NATIONAL MARKETS TO GLOBAL INVESTING AND BORROWING.
3. INNOVATIVE FINANCIAL INSTRUMENTS ARE INCREASING THE NUMBER OF OPTIONS AVAILABLE TO LENDERS
AND BORROWERS.

INTERNATIONAL BOND MARKET

- MARKET OF BONDS SOLD BY ISSUING COMPANIES, GOVERNMENTS, AND OTHERS OUTSIDE THEIR OWN
COUNTRIES.

EUROBOND – BOND THAT IS ISSUED OUTSIDE THE COUNTRY IN WHOSE CURRENCY THE BOND IS DENOMINATED

FOREIGN BOND – BOND SOLD OUTSIDE A BORROWER’S COUNTRY AND DENOMINATED IN THE CURRENCY OF THE
COUNTRY IN WHICH IT IS SOLD

INTEREST RATES – DRIVING GROWTH ARE DIFERENTIAL INTEREST RATES BETWEEN DEVELOPED AND DEVELOPING
NATIONS

INTERNATIONAL EQUITY MARKET – MARKET OF STOCKS BOUGHT AND SOLD OUTSIDE THE ISSUER’S HOME COUNTRY

- PRIVATIZATION
- EMERGING MARKETS
- INVESTMENT BANKS
- ELECTRONIC MARKETS
EUROCURRENCY MARKET – UNREGULATED MARKET OF CURRENCIES BANKED OUTSIDE THEIR COUNTRIES OF ORIGIN

- GOVERNMENTS
- COMMERCIAL BANKS
- INTERNATIONAL COMPANIES
- WEALTHY INDIVIDUALS

FOREIGN EXCHANGE MARKET – MARKET IN WHICH CURRENCIES ARE BOUGHT AND SOLD AND THEIR PRICES ARE
DETERMINED

CONVERSION: TO FACILITATE TRANSACTIONS, INVEST DIRECTLY ABROAD, OR REPATRIATE PROFITS

HEDGING: INSURE AGAINST POTENTIAL LOSSES FROM ADVERSE EXCHANGE-RATE CHANGES

ARBITRAGE: INSTANTANEOUS PURCHASE AND SALE OF A CURRENCY IN DIFFERENT MARKETS FOR PROFIT

SPECULATION: SEQUENTIAL PURCHASE AND SALE (OR VICE-VERSA) OF A CURRENCY FOR PROFIT

LARGEXT CURRENCY MARKET

USA: $3.20 TRILLION

UK: $1.33 TRILLION

JAPAN: $0.24 TRILLION

QUOTING CURRENCIES

QUOTED CURRENCY = NUMERATOR

BASE CURRENCY = DENOMINATOR

WHY IS EXCHANGE RATE RISK IMPORTANT TO COMPANIES INVOLVED IN INTERNATIONAL BUSINESS?

- EXCHANGE RATE RISK IS OMPORTANT BECAUSE IT CAN JEOPARDIZE PROFITS FROM CURRENT AND FUTURE
INTERNATIONAL TRANSACTIONS

24 HOUR TRADING
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Financial Institutions of the Philippine

- A COMPLEX STRUCTURE AND OPERATION INVOLVING EVERY INDIVIDUAL AND BUSINESS ORGANIZATION IN A
CIVILIZED SOCIETY. IT IS A NETWORK OF VARIOUS INSTITUTIONS WHICH GENERATES, CIRCULATES, AND
CONTROLS MONEY AND CREDIT.\

PHILIPPINES’ FINANCIAL INSTITUTIONS

- CENTRAL BANK/BSP
BANK INSTITUTIONS
Role of International Financial Institution known as (IFIS) ............................................................................ 1
Financial Institutions of the Philippine .......................................................................................................... 8

Role of International Financial Institution known as (IFIS) ............................................................................ 1

Financial Institutions of the Philippine .......................................................................................................... 8
PRIVATE BANKS

1. COMMERCIAL BANKS

: ACCEPTS DEPOSITS, OFFERS CHECKING ACCOUNT SERVICES, MAKES VARIOUS LOANDS, AND OFFERS BASIC FINANCIAL
PRODUCTS LIKE CERTIFICATES OF DEPOSIT (CDs) AND SAVINGS ACCOUNT TO INDIVIDUALS AND SMALL BUSINESSES.

: MAKE MONEY BY PROVIDING LOANS AND EARNING INTEREST INCOME FROM THOSE LOANS. THE TYPES OF LOANS A
COMMERCIAL BANK CAN ISSUE VARY AND MAY INCLUDE MORTGAGES, AUTO LOANS, BUSINESS LOANS, AND PERSONAL
LOANS.

2. EXPANDED COMMERCIAL BANKS/UNIVERSAL BANKS

: A BANK THAT COMBINES 3 MAIN SERVICES OF BANKING UNDER ONE ROOF.

3 SERVICES:

• WHOLSALE BANKING – INVOLVES BORROWING AND LENDING MONEY ON A VERY LARGE SCALE. IT INCLUDE
PENSION FUNDS, GIANT COMPANIES, GOVERNMENTS, AND OTHER FINANCIAL INSTITUTION.
• RETAIL BANKING – SERVICES MEMBERS OF THE PUBLIC AND SMALL AND MEDIUM-SIZE BUSINESSES. IT FOCUSES
ON LOOKING AFTER CUSTOMERS’ MONEY AS WELL AS OFFERING LOANS AND MORTGAGES
• INVESTMENT BANKING - FOCUS ON SERVICES FOR MAJOR INVESTORS AND COMPANIES. THEY SPECIALIZE, FOR
EXAMPLE, IN THE INVESTMENT REQUIREMENTS OD PENSION FUNDS
- GOVERNMENT BANKING INSTITUTIONS