MBF 306 INTERNATIONAL BANKING

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ASSIGNMENT

DRIVE	SUMMER 2014
PROGRAM	MBABF
SEMESTER	III
SUBJECT CODE & NAME	MBF 306 INTERNATIONAL BANKING
BK ID	B 1395
CREDITS	4
MARKS	60

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

Q. 1. a. Analyse and explain the changing role of international banking.

b. What are the advantages of international banking?

Answer:a. More than four years have passed since the onset of the financial crisis. Over these years, central banking functions have been stretched to the limits.  Recent developments demonstrate how fragile our financial system remains, not only because of debt legacy but more worrisome because of its mere design.  The public debt crisis in a number of advanced economies is also raising fundamental questions about the role of public debt instruments in our financial system.  Looking backwards, one can say that disciplining mechanisms in debt markets have clearly failed, often as a result of mutually reinforcing market and government failures. Too much debt in the public sector is the symptom of both ineffective public governance and market discipline. Budget rules, such as the no-bail-out provision of the Maastricht Treaty, didn’t contain the accumulation

Q. 2. a. Explain Basel capital adequacy ratio.

b. Describe the implementation of the new capital adequacy framework (Basel II) in India.

Answer: A measure of a bank's capital. It is expressed as a percentage of a bank's risk weighted credit exposures. This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world.  Two types of capital are measured: tier one capital, which can absorb losses without a bank being required to cease trading, and tier two capital, which can absorb losses in the event of a winding-up and so provides a lesser degree of protection to depositors.

The Reserve Bank of India decided in April 1992

Q. 3. Explain the legal issues in international banking.

Answer: International banks have played a significant role in the development of the GCC region in recent years. It was European, Japanese and American money, on the whole, that helped to fuel the boom years of the early part of the 21st century. However, the benefits haven’t all been flowing one way, with the growth of the Gulf region opening up many new opportunities from which international banks can generate business.

It is widely recognised that bank-based and market-based activities perform complementary functions. Both are often inseparable aspects of financial intermediation that depend heavily on the resilience of market infrastructure. The same is true in the international dimension. For instance, banks invest retail deposits in foreign securities, lengthening the

Q. 4.a. Explain the significance of forex management.

b. List the tools used for managing forex risk.

Answer: a.Business operations in countries across the globe have been in existence for centuries, but an unprecedented growth in world wide production and distribution of a large number of capital, intermediate and consumer goods has been witnessed in the past fifty years. At present most of the countries are economically related to each other through a complex network of trade, foreign investment and international loans.

b. Tools used for managing forex risk

·         For Controlling the Risk of Forex: When currency rate will change in Forex market, it may bring loss for you. Forex management can help for you to reduce this loss by providing your advance tool to control the risk of Forex. These tools are :

o   Forex future: Forex future is also called currency future. It means to contract of exchange of one currency to

·          

Q. 5.a. What is asset liability management?

b. Explain the asset liability management methodology in detail

Answer: a.Asset liability managementis a technique companies employ in coordinating the management of assets and liabilities so that an adequate return may be earned. By managing a company's assets and liabilities, executives are able to influence net earnings, which may translate into increased stock prices. Asset-liability management is one of the most important issues in bank strategic planning. This study presents an ALM methodology in a

b. Asset liability management (ALM) is the administration of policies and procedures that address financial risks associated with changing interest rates, foreign exchange rates and other factors that can affect a company’s liquidity. Asset Liability Management (ALM) seeks to limit risk to acceptable levels by monitoring and anticipating possible pricing

Q. 6. Describe financial innovations in international banking.

Answer: The global crisis of 2007 to 2009 has renewed the widespread debate on the ‘bright’ and ‘dark’ sides of financial innovation. The traditional innovation-growth view posits that financial innovations help reduce agency costs, facilitate risk sharing, complete the market, and ultimately improve allocative efficiency and economic growth, thus focusing on the bright side of financial innovation (Allen and Gale 1994). The innovation-fragility view, on the other hand, focuses on the ‘dark’ side and has identified financial innovations as the root cause of the

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