Sandag, Teffany A.

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THE DIFFERENCE BETWEEN DOMESTIC BANKS AND FOREIGN BANKS

Domestic banks and foreign banks are two different forms of banking. Domestic banks
are those banks operating within the boundaries of a country, while foreign banks are those
banks that do not limit their operations within their country, but extends or put branches outside
the boundary of their nation. Although they are in one country, these two banks have differences
in terms of their services and of course, in terms of profit.

Domestic banks offer different services such as loans, opening savings and checking
account, cash deposits among others. Loans offered in domestic banks include car loans, housing
loans, and salary loan. Local bank loans’ interest rate level is from 6.5% to 7%, and an average
of 1.75% per annum in cash deposits.

International banking provides additional services that domestic banks cannot provide in
facilitating the imports and exports of their clients in arranging financial trading. It includes letter
of credit, export credit and foreign exchange. A letter of credit is an instrument that a buyer can
request from his bank that guarantees and will makes payments for goods purchased once the
conditions are met. Export credit is a line of credit given to an importer by a bank in the
exporter’s country. Foreign exchange enables the clients to conduct cross-border transactions and
make foreign investments. Also foreign banks provide easy access to clients in exchanging their
money from peso currency to US dollar for instance. Compared to domestic banks, foreign banks
tend to have greater profits, higher interest rates and higher tax payment as well.