INTERNATIONAL FINANCE

İbrahim Emre Karaa (Ph.D)

What are the structure and participants of
the world financial system
The combination of financial markets and financial
institutions, which operate in a legal and tax
environment of international business, create the
global financial system
 The participants of the global financial
system
national participants - corporations, banks, specialized credit
and financial institutions, including insurance and pension
companies , stock and commodity exchanges, government ;
international participants - international corporations,
multinationals ,international banks, TNB, specialized credit
and financial institutions , large stock and commodity
exchanges, international monetary and financial institutions.
Nonbank financial institutions and central banks
What is the essence of financial
globalization?
Financial globalization is an objective process of the
integration of a large part of capital of different
countries, strengthening of their interdependence. Its
main features are: the availability of huge financial
resources of TNCs and TNBs; high intensity of cross-
border financial transactions of the global financial
system’s members; the emergence of new mechanisms
and instruments of international financial transactions
and the formation of the world financial market.
International financial integration
is the process of unification of financial services,
banking operations; liberalization of customs
procedures; unification of the system of coordination
through the international financial and credit institutions,
electronic system of payment instruments; movement
toward global monetary system with unified world
money.
EU has the major progress in financial
integration.
Its concept of single financial area:
total liberalization of payments and capital movements
open access to market of banking, insurance and other
financial services of partner countries to the companies and
individuals of EU’s countries;
the harmonization of banking, tax and other legislation on
the investment;
the increase of control over the activities of the national
credit and financial institutions and protection of the
interests of investors
the ensure of publicity and transparency of existing law
Financial integration with the opening of financial markets is
profitably to countries:
broader sources of investment finance are proposed to the
countries to supplement domestic savings;
open capital markets contribute to the growth of effectiveness
of domestic financial institutions and the conduct of reasonable
macroeconomic policy
reducing financial constraints, open capital markets give the
time to the countries to implement the settlement of payments
in order to correct imbalances, caused by external shocks;
creditor countries have more opportunities for diversification
of investment and risks;
the system of multilateral trade is supported, as the range of
possibilities expands for diversification of the portfolio of
securities and for the effective placing of global savings and
investments.
Financial institutions
establish their branches in major financial centers to
perform the borrowing, lending, and investment and for
the provision of other financial services. Financial
integration provides significant benefits both investors and
borrowers, but they are subject to risk.
International financial institutions are the branched
network of international currency and credit and financial
institutions. The preconditions for the creation of them
were: strengthening of internationalization of economic
life, the development of transnational corporations and
TNB; development of international forms of regulation of
currency and credit relations; increasing instability of
currency and financial system.
Financial institutions
The system of international financial institutions
includes world-class organizations (IMF, World Bank
Group, which includes the International Bank for
Reconstruction and Development, International
Finance Corporation, International Development
Association, etc.), regional financial institutions.
Technological innovations, new financial instruments
What is the specificity of main global
financial centers?
The national currency, credit and equity markets, that are
closely interconnected with the similar global markets,
take part in the operations of the world financial market
The global financial centers were formed on the base of
the huge domestic markets. They conduct international
operations.
These centers are:
New York, London, Zurich, Luxembourg, Frankfurt
am Main, Singapore, Hong Kong, Bahamas, Panama,
Bahrain and others.
What are the financial centers in
developed countries?
The largest global financial centers are New York, London,
Tokyo
Feature of New York as a financial center is that it is only
the international capital market and the basic source of
Eurodollars
London is a financial center of Europe. It is the greatest
national financial center in the world with the equally well
developed markets of the short-term credits and long-term
loans, the powerful exchange, the high-organized insurance
and freight business.
Tokyo becomes the international financial center after 1970.
What are the financial centers of
developing countries?
Hong Kong became an international financial center
of China in 1997.
Singapore is the financial center with international
reputation, which focuses its work on the Asia Pacific
region.
Shanghai can obtain the status of international
financial center. This can occur while maintaining the
current rate of economic growth in China and use the
status and benefits of a free economic zone
 What is the place of offshore zones in the system of world
financial
centers?

Characteristics of the offshore zones:

liberal monetary and credit legislation, that protects the
interests of investors without imposing unnecessary
restrictions on financial institutions (low taxes, small
government intervention);
carrying out of monetary and credit transactions mainly
with foreign currency for this country;
legislative admittance of selling currency at the official
price, when the official exchange rate is below market
rate and of buying currency when the official exchange
rate is higher than on the market .
"tax harbors & moderate level taxtation
countires
absence of income tax for foreign "preferential"
companies
Tax harbors: Isle of Man, Gibraltar, Panama, the
Bahamas, Turks
Moderate tax: Switzerland, Holland, Austria, Ireland,
and Belgium
Southern Cyprus and Ireland.
Madeira, Dutch Antilles, Mauritius, British Virgin
Islands.