As currencies among hundreds of countries have become fluid and easily exchanged, and as companies of all sizes from these many nations adopt business models inclusive of international commerce, banks and banking divisions have been developed to serve the needs of global citizens and international businesses. Many of the largest national US banks have international banking divisions, and many non-US banks operate divisions within the US.
Businesses that engage in international commerce and trade need banking services that allow them to finance operations in markets around the world, and so as to be able to pay employees and accept payment for materials, finished products and services in many different currencies.
According to information provided by Moody’s, the five largest international banks in terms of deposits, reserve assets and number of employees, are as follows:
- Bank Of America Corporation (U.S.)
- HSBC Holdings Plc (UK)
- JP Morgan Chase (U.S.)
- Citigroup Inc (U.S.)
- Intesa Sanpaolo (Italy)
International Business Banking Services
Credit is an important part of the international trade process as billions of dollars in materials and goods are exchanged between international business entities. Importers purchasing product from a foreign producer must often do so on credit until the product is sold and distributed, generating the revenue necessary to pay for the imported product. If an importer cannot establish credit directly with the exporter, as is often the case with a new business partnership, international banks can facilitate the process through the issuance of letters of credit, documentary collections services and banker’s acceptances.
With a letter of credit, a bank guarantees payment to the exporter at the time the exporter has fulfilled the terms of the contract between the importer and exporter. Essentially, the bank is extending credit to the importer, who is then responsible for repaying the bank. A commercial letter of credit is issued as the primary means by which the exporter is assured of payment, and also serves the importer by putting the bank in a position to confirm collateral by withholding payment until the time the supplier confirms the product has been shipped. A standby letter of credit is an additional assurance to the supplier that payment will be received even in the event that a dispute arises between the supplier and the importer, which may result from the importer’s dissatisfaction with the goods received and refusal to make payment as arranged.
International banks also provide documentary collections services. A documentary collection is a transaction in which international banks act as intermediaries between importers and exporters in the collection of payment and transfer of title on goods. In this situation, the bank is not guaranteeing to pay the exporter, but rather, the importer’s and exporter’s banks are handling the shipping and payment documents, and the importer does not receive title to the shipped goods until paying for them as agreed. Documentary collections services are used to protect the interests of the exporter by allowing the bank to act as an intermediary, holding onto the shipping documents so the exporter can retain title of ownership to the goods until the time the importer pays.
Another way that banks extend credit is with banker’s acceptances. Usually, when a bank customer makes a draft (that is, writes a check or requests a wire transfer), a bank expects money in the customer’s account to cover the draft immediately. However, a business can make arrangements with international banks to accept drafts to be paid by the business at a later date. If the bank agrees to accept the draft with the understanding that funds aren’t immediately available, they will allow a banker’s acceptance and charge the debtor interest accordingly. When a bank accepts an importer’s draft, the bank is then obligated to pay the exporter, with the understanding that the importer will repay the bank by the agreed-upon date.
Banks can sell a banker’s acceptance on the money market (specific to securities that reach maturity within one year or less) and when payment on the acceptance comes due, the principal, along with interest and fees, goes to the new owner of the acceptance.
Another important international banking function is foreign exchange of currency for importers that need to pay suppliers in foreign currency, as well as for exporters receiving foreign currency. Foreign currency exchange services include:
- Spot transactions in which a business can buy or sell foreign currency and receive it on the spot date, usually within two business days. This service might include foreign currency drafts and international wire payments in foreign currencies.
- Forward transactions in which a business can buy or sell foreign currency at a fixed rate for delivery at a specified future date beyond the typical two days associated with spot transactions. These transactions let a business lock in a value for future payments and receipts even if exchange rates change significantly.
- Foreign check clearing, which is in place to reduce the time it talks for foreign checks to clear. A bank may, in effect, purchase the check from the business, which then receives U.S. dollars before the check actually clears. The bank’s purchase is subject to final payment of the check.
- Foreign drafts in which the bank issues drafts in a foreign currency that can be used by importers to pay overseas suppliers
International bankers may also offer foreign direct investment assistance, either inward assistance for international companies wanting to establish or expand their operations within their own country, or outward assistance for in-country companies that want to establish or expand their international operations. While loans may be part of this assistance, it also includes navigating other factors involved in setting up international operations. For this purpose, an international banker may have a network of correspondent branch or subsidiary banks in other countries that accept deposits and perform services for the banker, as well as professional service firms and governmental agencies from which to obtain help with issues pertaining to taxation and other legal matters.
International Private Personal Banking
International private personal banking services are usually used by high net worth individuals and families who want to maintain bank accounts abroad. Private international bankers develop personal relationships with their customers, helping them navigate through international banking laws.
Sometimes called offshore banking, international personal banking is used by the wealthy to diversify their cash assets among various currencies to hedge against the possibility that one currency drops significantly in value. World travelers and expatriates who live outside of their country of citizenship also use international banks, as do people living in unstable parts of the world, as offshore banking is a way to keep their money safe from political and economic upheavals. Offshore banks also tend to provide more privacy for account holders who do not wish to have their financial assets tracked or made public.
Offshore banking can sometimes provide tax benefits, although this often involves complex strategies such as offshore trusts, private interest foundations and offshore companies. Generally, interest or investment income still comes with tax obligations to the account owners in their own countries.
International Banking Education and Degree Options
Getting started in banking generally requires a bachelor’s degree in business administration or a related area, such as finance, but bankers very often hold graduate degrees in finance or accounting, or master’s degrees in business administration (MBAs).
Students who know they want to go into banking can get a Bachelor of Applied Science in Banking or a bachelor’s degree in business administration with a banking and finance concentration. A bachelor’s in international business is another option for getting into international banking, because the degree provides graduates with an understanding of international trade and finance. For graduate study, in addition to the MBA option, master’s degrees are available in banking and financial services management, as well as in international business.
Although schools in the U.S. don’t offer degrees specific to international banking, these degrees are available in other countries, including the UK, Ireland, France, Austria, Switzerland and the United Arab Emirates. Specialized degrees offered by universities in these countries include baccalaureate and graduate degrees in finance and international banking.
Current bank managers interested in international banking often pursue a graduate-level Certificate in International Bank Management.
International Banking Certifications and Designations
Organizations that offer certifications of potential interest to international bankers include the following:
- The American Bankers Association offers 16 banking-related certifications, though they don’t focus exclusively on international banking. Of particular interest to international private personal bankers would be the Certified Trust and Financial Advisor (CTFA) designation.
- The American Certification Institute offers three certifications specific to international banking professionals:
- Certified International Bank Management Professional (CIBMP)
- Certified International Bank Manager (CIBM)
- Certified International Bank Management Executive (CIBME)
Becoming certified requires at least two years of experience in banking and/or bank management or a bachelor’s degree. Other requirements include a letter of recommendation from a senior executive, completion of the respective program’s required coursework and passing scores on the certification exam. Recertification must be pursued every five years and requires continuing education.
- The Global Association of Risk Professionals offers an International Certificate in Banking Risk and Regulation (ICBRR) that focuses on understanding the methods of risk management, the governing structures for managing risk in banks and banking regulatory principles. Candidates for this designation must complete a four-part self-study program and pass an exam within nine months of registering for the certification.
- The Florida International Bankers Association(FIBA), Inc., offers Anti-Money Laundering (AML) Certifications through FIBA’s educational arm, the FIBA AML Institute. Two levels of certification are available:
- Certified Associate in Anti-Money Laundering (FIBA AMLCA)
- Certified Professional in Anti-Money Laundering (FIBA CPAML)
Certification through FIBA requires the completion of program-specific courses and a passing score on the certification exam. The certification courses provide knowledge required by the Bank Secrecy Act and the Office of Foreign Assets (OFAC) (OFAC is the part of the U.S. Treasury Department that enforces trade and economic sanctions). Courses are available in both English and Spanish. Maintaining certification requires ten AML continuing education credits each year.
Professional associations that support international bankers include:
- The Institute of International Bankers, which supports international bankers in the U.S. by helping resolve the legislative, regulatory and tax issues related to international financial institutions that have operations within the United States
- The International Banking, Economics and Finance Association (IBEFA), which focuses on the scholarly study of banking, economic and financial issues, both in individual countries and across global financial markets
- The Florida International Bankers Association (FIBA), Inc., which has members from 18 countries, most of whom focus on business in Latin America
- The International Bankers Association of California, which is a professional organization primarily dedicated to international bankers working in California
- The International Banking Federation, which is based in the United Kingdom, represents the combined views of a group of national banking associations that represent more than 18,000 banks around the world
Jobs and Salaries
International banking includes a number of different jobs, ranging from entry-level positions to top executive positions. Some representative job titles include:
- International Private Banking Officer
- Personal Banking International Representative
- International Banking Representative
- Account Manager
- Commercial Banking International Officer
- International Banking Manager
- International Banking Specialist
- International Business Development Manager
- Director International Banking
- VP Private Banking
International banking salaries vary based on many factors, including experience, length of service, level of responsibility and the location and size of the institution. The US Department of Labor, Bureau of Labor Statistics provides salary data specific to various professions within the banking industry. These figures represent the national average yearly salary for positions held by US citizens and residents:
- Financial managers, $99,340
- General and operations managers, $91,562
The banking professional staffing agency, Bank Staffers, lists jobs with international or global banks. Here’s a sampling of salaries offered for open positions from January 2012:
- VP Compliance Officer, $150,000 to $200,000
- VP Project Finance, up to $130,000
- Institutional Sales, $125,000 to $150,000
- Capital Markets Auditor, $100,000 to $140,000
- Foreign Exchange Spot Trader, $100,000 to $110,000
- Credit Administration, up to $90,000
- Senior Credit Analyst, up to $85,000
- Compliance Officer, up to $80,000
- Securities Lending Paralegal, up to $70,000
- International Accountant, $50,000 to $60,000
- New Business Loan Development Officer, $50,000 to $70,000
- Letters of Credit Technician, $49,000 to $55,000
- International Documentation Trust Officer, $45,000 to $50,000