International Banks And The Rise Of Financial Derivatives eBook

Essay from the year 2003 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,9 (B+), Oxford Brookes University (Business School), course: Practise of International Banking, language: English, abstract: Derivatives trading is now the world's biggest business, with an estimateddaily turnover of over US$2.5 trillion and an annual growth rate of around14 per cent (Swan, 1999). Derivatives markets have ancient origins, anda long and complex history of trading and regulation. This work examinesthe history of derivatives and their impacts on the structure ofinternational banks in order to show the implications of moderninternational banking in comparison to domestic banking. Mishkin (2003) describes banks as financial institutions that acceptdeposits and grant loans. In this definition banks are the financialintermediaries that the average person contacts most frequently for itsfinancial dispositions, savings, investments and payments. The structureof a bank therefore seems to be adjusted to the purpose of its businessactivity. Mishkins traditional definition of a bank includes to those financialinstitutions we refer to as mutual savings banks, savings and loanassociations, commercial banks and credit unions. Their traditional corebusiness is to provide the settlement of national payments and totransform funds from savers over time as well as to process marketinformation (Canals, 1997). They focus on domestic or regional,eventually even local markets and realize their profits from interestmargins and balance sheet activities. Therefore they employ an asset- andliability management in order to avoid liquidity and credit risks.