Types of International Banking Offices
The services and operations which an international bank undertakes is a function of the regulatory environment in which the bank operates and the type of banking facility established.
- A correspondent bank relationship- Established when two banks maintain a correspondent bank account with one another. The correspondent banking system provides a means for a bank’s MNC clients to conduct business worldwide through his local bank or its contacts.
- A representative office- A small service facility staffed by parent bank personnel that is designed to assist MNC clients of the parent bank in its dealings with the bank’s correspondents. It is a way for the parent bank to provide its MNC clients with a level of service greater than that provided through merely a correspondent relationship.
- A foreign branch bank- Operates like a local bank, but legally it is a part of the parent bank. As such, a branch bank is subject to the banking regulations of its home country and the country in which it operates. The primary reason a parent bank would establish a foreign branch is that it can provide a much fuller range of services for its MNC customers through a branch office than it can through a representative office.
- A subsidiary bank- is a locally incorporated bank that is either wholly owned or owned in major part by a foreign subsidiary. An affiliate bank is one that is only partially owned, but not controlled by its foreign parent. Both subsidiary and affiliate banks operate under the banking laws of the country in which they are incorporated.