Origin of Ā Offshore Banking The origin of offshore banking units can be traced to the growth of financial activity in tax havens. A ātax havenā is a place where non-residents can receive income or own assets without paying high taxes. Some such places are Bahamas, Bermuda, Hong Kong, the Netherlands, Panama and Switzerland. Some features of these tax havens are: Low rate or complete absence of income tax on foreign investment and income. High degree of economical and political stability and a political system, which directly or indirectly encourages and fosters business activity at the center. Strict and well enforced rules of banking secrecy. Absence of exchange control Availability of supporting infrastructure such as an efficient communications and transportation network.Ā Continue reading
International Financial Institutions
Case Study: Reasons behind the Bankruptcy of Lehman Brothers
The bankruptcy of Lehman Brothers was a result of the investment bankās exposure to the 2007-2010 financial crisis. In fact, the demise of the investment bank would come to symbolize the crisis. Therefore, in order to understand the bankruptcy of Lehman Brothers, a consummate understanding of the 2007-2010 financial crisis is requisite. As such, an examination of crisis will serve as introductory. Several factors contributed to the fall of Lehman Brothers. Perhaps most important, however, was the period of deregulation that preceded the crisis. Arguably, the period of deregulation started during the Reagan Era. Reaganomics, the lassiez faire economic policies advocated by the former president, may have served as the starting point for the deregulatory climate that ensued for theĀ Continue reading
International Commodity Exchanges
Recent years have witnessed a steep rise in the creation of the commodity exchanges along with a consistent expansion of the existing ones. The United States, Japan, United Kingdom, Brazil, Australia, Singapore are homes to leading commodity futures exchanges in the world. Worlds Major Commodity Exchanges 1. The New York Mercantile Exchange (NYMEX) The New York Mercantile Exchange is the worldās biggest exchange for trading in physical commodity futures. It is the primary trading forum for energy products and precious metals. The Ā Ā Exchange has been in existence for 132 years and performs trades through two divisions, the NYMEX divisions, which deals in energy and platinum and the COMEX division which trades in all the other metals. A majorĀ Continue reading
Commodity Market Participants
Commodity market is a place where trading in commodities takes place. Markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which they are bought and sold in standardized Contracts. It is similar to an Equity market, but instead of buying or selling shares one buys or sells commodities. Commodity market is an important constituent of the financial markets of any country. It is the market where a wide range of products, viz., precious metals, base metals, crude oil, energy and soft commodities like palm oil, coffee etc. are traded. It is important to develop a vibrant, active and liquid commodity market. This would help investors hedge their commodity risk, take speculativeĀ Continue reading
External Commercial Borrowing (ECB)
External Commercial borrowing (ECB) refers to commercial loans availed by companies from non-resident lenders in the form of bank loans, buyers credit, suppliers credit, securitized instruments (e.g. floating rate notes and fixed rate bonds). A company is allowed Ā to raise ECB from internationally recognized source such as banks, export credit agencies, suppliers of equipment, foreign collaborators, foreign equity-holders, international capital markets etc. However, offers from unrecognized sources are not entertained. External Commercial Borrowings (ECBs) include bank loans, suppliers and buyers credits, fixed and floating rate bonds (without convertibility) and borrowings from private sector windows of multilateral Financial Institutions such as International Finance Corporation. In India, External Commercial Borrowings are being permitted by the Government for providing an additional sourceĀ Continue reading
Growth of Development Banks
Although development banks attracted great attention after World War II but there one insurances or such institutions even much earlier, First development bank was found in Belgium in 1822. The purpose of financing and promoting industry. It was a joint stock bank which nursed funds through the sale of shares and bonds in order to finance; commercial and industrial enterprises. This new technique of banking got impetus only in 1852 when āCredit Mobilize of Franceā was set up. It mobilized resources through the sale of bonds and promissory notes and made long-term investments particularly in public utility undertakings, railways, insurance companies and banks. It set a model for similar investment banks established in Germany, Austria, Belgium, Netherlands, Italy, Spain andĀ Continue reading