A Bank May Establish a Multinational Operation for the Reason

question 24

Multiple Choice

A bank may establish a multinational operation for the reason of knowledge advantage.The underlying rationale being that

• A)local firms may be able to obtain from a foreign subsidiary bank operating in their country more complete trade and financial market information about the subsidiary's home country than they can obtain from their own domestic banks.
• B)by maintaining foreign branches and foreign currency balances,banks may reduce transaction costs and foreign exchange risk on currency conversion if government controls can be circumvented.
• C)greater stability of earnings is possible with international diversification.Offsetting business and monetary policy cycles across nations reduces the country-specific risk of any one nation.
• D)the foreign bank subsidiary can draw on the parent bank's knowledge of personal contacts and credit investigations for use in that foreign market.

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Definitions:

Hemoglobin

The oxygen-carrying pigment and protein in the red blood cells.

Prothrombin

A protein in blood plasma that is the precursor to thrombin and plays a key role in blood clotting.

Antibody

A protein produced by the immune system that recognizes and binds to foreign substances, such as bacteria and viruses, to help in their destruction.

Antigen

A substance that provokes an immune response, leading to the production of antibodies.