People are often intimidated with the different technical and transactional terms when it comes to international banking processes. Because majority of the population do not understand most of banking concepts and processes, people does not know how they can manage and benefit from these banking transactions. This article will aim to shed light into the basic banking processes undertaken in an international scale. It will also discuss in layman language the technical terms used by banking institutions with regard to international banking.
What is an international bank?
To be able to understand the processes and terminologies used in international banking you should have a basic grasp of what an international bank is. The term international bank refers to the services being offered banks. International banks are entities engaged in the safekeeping and lending of funds in foreign currency derived from its deposits from the public. These services attain international status because majority of the money transacted are in foreign currency and the depositor wherever he is can access that account and transact with other international banks with regard to deposit and withdrawal from that account.
In addition, international banks have the resources and financial capability and status to deal with regional banks. Say for example, you have an international bank account set up with a bank BN, located in United States; while you are in Japan, you can withdraw money from any branch of bank BN. In this light, bank BN is considered an international bank.
Why set up an account with an international bank?
If you are a businessman engage in international transactions involving different foreign currencies, it is better to deposit your money with an international bank. If you are an overseas worker looking to send money to your love ones in your home country, it is important to set up an international bank account with an international bank. Why? This is because services of international banks are available all over the world. It presents convenience and practicality to business owners and overseas workers in completing their deposit and withdrawal transactions. In addition, they can be assured of the credibility of the banks and the safety of their money. So if you have a foreign account, it is better to transact and deposit it with an international bank.
What are the benefits derived by setting an account with an international bank?
As mentioned above, if you are an individual handling a foreign account, then it is advisable to set up the account with an international bank. Business entities and individuals have various reasons why they would rather transact with an international bank than a regional bank. Here are some of the primary reasons why more people and banking institutions are transacting with international banks.
Ideal for tax avoidance scheme
Don’t take the word tax avoidance negatively. In some countries, tax avoidance is legally allowed. Tax avoidance are measures and means how to reduce taxes demanded by the government where the account is set up. Example of a tax avoidance measure is the imposition of value added taxes imposed on exempt entities; these exempt entities are exempt from paying value added taxes so what they do is that they transfer the tax to final consumers through their purchasers making the final consumer ultimately liable for the value added tax. In international banking transaction you have the concept of offshore saving accounts. These savings accounts are given tax advantages in the form of tax avoidance measures by states to attract dollar investments. In illustration, say Philippines would want to attract foreign investors; the Philippine government will offer these foreign investors tax packages through the imposition of tax exempt saving account. The Philippine government then will issue a law requiring its regional banks and international banks operating within the country to open offshore savings account with less or no final tax at all. This is the appeal of opening offshore savings account.
Asylum and safety
Perhaps one of the more popular reasons why big conglomerates open bank accounts with international banks is financial asylum and money safety. Bank accounts with international banks are often outside the jurisdiction of states and could not be easily subjected to garnishment or other court orders. In addition to this, international banks accord its depositors high interest rate as well as money security from bankruptcy and law suits.
Conclusion
International banks play an important role in the facilitation of international business and social transactions. They are the intermediary connecting a regional bank into the international scale. With the notoriety of international banks with regard to safety of deposits, there can be no doubt that international banks will continue to be a major player in the world of financial affairs.
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