By Luigi Wewege, Senior Vice President, and Head of Private Banking of Belize based Caye International Bank
The concept of international banks is nothing new, but it does seem unfamiliar to many people. Common questions can include:
- What is it about international financial institutions that attracts so much attention?
- Are they all that different from domestic banks?
- What are some of the reasons why people would choose to establish accounts at international banks along with maintaining domestic accounts?
Could it be that an account or two at an international bank would be helpful in your case? Here are some basics that will help you understand more about these banks and what they can do for you.
Defining the Meaning of an International Bank
An international bank is a financial institution that is based in a foreign location and provides services to clients from around the world. In many ways, international banks provide services and support that is familiar to anyone who has maintained any type of bank account. What is different is the additional services that are often included.
There’s more than one type of international bank. The one that most people and many business owners will use is known as an offshore private bank. There are also institutions that are classed as correspondent banks, offshore banking centers, and subsidiary banks. For now, let us focus on what private banks have to offer and how they compare and contrast with domestic banks.
Who Can Benefit from Opening Accounts at an International Bank?
The short answer is that just about anyone can benefit from opening a savings, time deposit, or checking account at an international bank. This applies to those who are considered wealthy, but people who earn middle-class incomes can also make use of this type of financial resource.
People who want to build up financial reserves while taking advantage of excellent interest rates should consider opening offshore accounts. Those who want to expand their investment portfolios to include international investments may find going through an offshore bank is a smart move.
When the goal is to set aside funds specifically for retirement, opting for offshore accounts is a great idea. Even business owners who want to establish a presence that makes it easier to conduct business on an international scale may find that offshore accounts are a better option.
Does the Location Really Matter?
Choosing to open any type of banking or investment account with an international bank means considering the right location. It’s important to remember that banking laws can vary from one nation to the next. By understanding how those laws apply and what they mean in terms of building wealth, it’s important to look for a few qualities.
You want to consider banking options in nations with a proven track record of political and economic stability. The regulations that govern international accounts must provide a reasonable amount of protection for depositors.
Access to the accounts also matters; the ability to manage them online as well as in person is a plus. You want to ensure that your banking information is considered proprietary and that it will not be shared with outside entities unless you provide permission. Finally, you want to ensure that the return on your balances is competitive and somewhat consistent.
What Types of Banking Services Are Offered?
You will find that the ideal international bank offers accounts that are much like those you use at home. Checking and savings accounts are prime examples. As with many domestic accounts, these international counterparts provide interest if you maintain over a certain balance. Top offshore banks provide debit cards for checking accounts, allowing you to access your funds at will. In some instances, using the debit card connected with your international account will be a better choice than using a domestic one.
There are also time deposit and different forms of investment accounts to consider. One of the benefits of the latter is that you may be able to include investment options that are not available in your country of origin. That helps broaden the scope of your portfolio and possibly add additional security against economic shifts. For the former, you’ll find the rate that applies for the term you select is often competitive with what you could get with similar accounts at home.
Tips for Choosing the Right International Bank
You already know that the location is important to choosing the right international bank. Regulations and banking laws are reasons why the location matters. Ideally, those laws provide protections for you and the resources held in those accounts. This is particularly important if you plan on retiring in the nation where those accounts are based. When time for retirement comes, moving around your assets will be much easier with those established accounts.
Do take the time to find out more about how the bank operates. Does it have an investment arm that would allow you to take advantage of opportunities to build more wealth? If the plan is to invest in real estate within that nation, does the bank have loan programs that you could use? Will you need an agent to manage your accounts or can you take care of this remotely as well as when you visit the nation?
Finally, the absence of a language barrier will definitely make communicating simpler.
Managing Your International Bank Accounts
On the issue of account management, do ensure that you know exactly what policies and procedures you will need to follow. Today, many international banks provide customers with secure access to their accounts.
With some banks, it’s possible to set up a single point of access that includes a username and password, along with some secondary form of identification. In this scenario, you would be able to log in to a central interface and manage everything from moving money from a savings to a checking account, shift returns from your investment account to the checking or savings account, or move money from a checking or savings account to an investment account.
The value of online access is that you can do your banking any time of the day or night. While the transactions may not complete until the following business day, you can clearly see the status at any time. For example, you may see a transfer of funds from the checking to the savings account occur immediately. If you set up a transfer to a different institution, that may not show as completed until the following business day.
Final Thoughts on International Banks
As with domestic banks, it pays to research the choices thoroughly. Be sure you know what to expect in terms of transaction fees, limits on transaction totals per business day, and the options for customer service and support that are available.
Once you are comfortable with what the bank has to offer, set up an account and see how things go. If you are happy, establishing additional accounts with that same bank may be in your future.
How to Open Your International Bank Account
Have you given some thought to opening an account with an international bank? The financial service professionals at Caye International Bank can provide guidance in determining what type of accounts would help you work toward your financial goals. Start today and those accounts could be in place a lot faster than you thought possible.
This is a Sponsored Feature
Luigi Wewege is the Senior Vice President, and Head of Private Banking of Belize based Caye International Bank, a FinTech School Instructor and the published author of The Digital Banking Revolution – now in its third edition.
You can follow his posts on trends shaping the banking and financial services industry on Twitter: @luigiwewege
A quarter of banking customers noted an improvement in customer service over lockdown, research shows
SAS research reveals that banks offered an improved customer experience during lockdown
This represents some good news for banks in an extremely challenging time, with 59% of customers also saying they’d pay more to buy or use products and services from any company that provided them with a good customer experience over lockdown.
The improvement in customer experience also coincides with a rise in the number of digital customers. Since the pandemic started, the number of banking customers using a digital service or app has grown by 11%, adding to an existing 58% who were already digital customers. Over half (53%) of new users plan to continue using these digital services permanently moving forward.
Brian Holden, Director, Financial Services at SAS UK & Ireland, said:
“It’s notable that in times of need customers value being able to communicate with their bank and place an even higher value on good customer service. A rise in the number of digital customers means banks can now reach a wider audience online, leveraging AI and analytics to offer a more personalised experience.
“There is work to be done, though. Even greater personalisation is needed if banks are to win over the 12% of customers who felt banking services deteriorated over lockdown. And this personalisation will need to get right down to a segment of one to properly reflect the unique circumstances some individuals now find themselves in due to the pandemic.”
While the number of digital users grew over lockdown, there is still a quarter (24%) of the banking customer base that have chosen not to make the switch to digital services.
Meanwhile, failure to offer a consistently satisfactory customer experience could prove costly for banks, with a third (33%) of customers claiming that they would ditch a company after just one poor experience. This number jumps to 90% for between one and five poor examples of customer service, so this just underlines how much retail banks can win or lose in these difficult times.
For more insight into how other industries across EMEA performed during lockdown, download the full report: Experience 2030: Has COVID-19 created a new kind of customer?
Swedish Bank Stress Tests in Line with Recent Rating Actions
The Swedish Financial Supervisory Authority’s (FSA) latest stress test results show major Swedish banks’ robust ability to absorb credit losses. The results support Fitch Ratings’ view that short-term risks have abated in recent months, and are in line with Fitch’s assessment of major Swedish banks’ capitalisation at ‘aa-‘, which was a factor when Fitch removed the ratings of Handelsbanken, Nordea (not covered by the FSA’s stress test) and SEB from Rating Watch Negative in September.
The FSA estimated about SEK130 billion of credit losses over 2020-2022 for the three largest banks (Swedbank, Handelsbanken and SEB) under its stress test. This represents about 220bp of their loans, or about 70bp annually. However, the banks’ pre-impairment profitability in the stress test could absorb credit losses of up to about 110bp of loans annually. Fitch’s baseline expectation is for credit losses below 20bp of loans in 2020 and 8bp-12bp in 2021.
Capital remained strong under the stress test. The average common equity Tier 1 (CET1) ratio fell by only 2.8pp (1.9pp if banks did not pay dividends) from 17.6% at end-June 2020. The capital decline was not driven by credit losses, which could be absorbed by pre-impairment profitability, but by risk-weighted asset inflation.
The three banks’ 3Q20 results showed that capital has been resilient despite the coronavirus crisis. The banks had a CET1 capital surplus over regulatory minimums, including buffers, of almost SEK100 billion (excluding about SEK33 billion earmarked for dividends). SEB had a CET1 ratio of 19.4% at end-September, Handelsbanken’s was 17.8% and Swedbank’s 16.8%.
The SEK130 billion credit losses under the latest stress test are lower than under the FSA’s spring 2020 stress test (SEK145 billion), which also covered a shorter period of two years. However, they are still larger than the actual losses incurred by the three banks during the 2008-2010 crisis. This is despite tightened underwriting standards by the three banks in recent years, including, in the case of SEB and Swedbank, in the Baltics, the source of most of their loan impairment charges in the previous crisis.
In its baseline economic forecasts, the FSA assumes a harsher shock to Sweden’s GDP in 2020 and 2021 (-6.9% and 1%, respectively) than Fitch’s baseline (-4% and 3.4%), although it assumes a similar recovery by end-2022. It also assumes real estate price corrections, which appears particularly conservative in light of a 11% housing property price increase over January to November 2020.
The ratings of Handelsbanken (AA), Nordea (AA-) and SEB (AA-) are on Negative Outlook due to medium-term risks to our baseline scenario. The rating of Swedbank (A+) is on Stable Outlook, reflecting significant headroom at the current rating level following a one-notch downgrade in April due to shortcomings in anti-money laundering risk controls.
Future success for banks will be driven by balancing physical and digital services
Digital acceleration due to COVID-19 has not eliminated the need for bank branches
Faster service (23%), smaller queues (26%) and longer opening hours (31%) are among customers’ biggest asks of their bank branch, new research from Diebold Nixdorf today reveals. But with 41% consumers saying they would be comfortable to engage with all banking services via an app, it is vital that banks respond to the full spectrum of customer needs – balancing and evolving their offerings on multiple fronts.
A third (35%) of customers say they will always want access to physical, in-branch banking services in some capacity and one in ten (10%) consumers will never bank predominantly online in the future. This demonstrates that there remains an important role for the services a branch provides. This role, however, continues to shift away from purely transactional banking:
A quarter (26%) value face-to-face advice when it comes to their banking needs
One in five (18%) seek advice on different products
17% want to speak to the staff or other customers.
Matt Phillips, Diebold Nixdorf vice president, head of financial services UK & Ireland, said: “The majority of banks have spent the last decade focusing on their digital strategies and investing in improving – or establishing – their online customer experience. However, the data shows that there is still an essential role for physical branches. Banks now increasingly face the challenge of continuing to provide customers with access to a range of physical and as well as digital services, giving them the flexibility to choose the best service for them at any given moment in time.”
When looking beyond the impact of COVID-19, planned branch visits by customers are expected to rebound to 28%, following a dip to 11% during lockdown. And when asked about the new services they’d like to see inside their bank, sixteen percent of respondents said more self-service machines would improve their in-branch experience.
Matt Phillips continues: “In a world that is fast evolving and where the future is digital, there’s no doubt that high street banks must, and are, responding to the needs of highly digital customers. But not every customer requirement is digital. There is still a strong need for physical bank branches and the interaction and services they offer, and striking this balance between physical and digital is where the industry must come together to provide solutions. For example, building a strong, leave-behind strategy is something we’re seeing across the board when banks have to close branches, ensuring customers have access to self-service machines to complete all their transactional needs.”
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