A Bank May Establish a Multinational Operation for the Reason

question 68

Multiple Choice

A bank may establish a multinational operation for the reason of wholesale defensive strategy.The underlying rationale being that

• A)banks follow their multinational customers abroad to prevent the erosion of their clientele to foreign banks seeking to service the multinational's foreign subsidiaries.
• B)multinational banking operations help a bank prevent the erosion of its traveler's check,tourist,and foreign business markets from foreign bank competition.
• C)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.
• D)multinational banks are often not subject to the same regulations as domestic banks.There may be reduced need to publish adequate financial information,lack of required deposit insurance and reserve requirements on foreign currency deposits,and the absence of territorial restrictions.

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Definitions:

Covert Collusion

Covert Collusion occurs when businesses secretly cooperate to fix prices, limit supply or engage in other anticompetitive practices without public or regulatory knowledge.

Price Leadership

A market situation where one leading company sets the price for goods or services, which other competitors in the market then follow.

Colluding Oligopolist

Firms within an oligopoly that agree to work together instead of competing, in order to control prices and dominate the market.

Perfect Competitor

A theoretical market structure in which many firms sell identical products, and there are no barriers to entry or exit, leading to optimal price and output levels.