Offshore banking is the action of having a bank account outside of the country of residence. Typically it offers many advantages like greater privacy, low or no taxation, easy access to deposits and protection against local, political, or financial instability, but has also been popular for its use of illegal practices like money laundering and tax evasion. Those against offshore banking view its illegal reputation and predict that it will only cause further damage like providing fund for terrorism or holding underground economies. However other experts believe that offshore banking is a safe haven for depositors and has had a substantial impact on the international economy in today’s world.
Though perfectly legal, since the late 1990’s
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It is for this reason why those who oppose offshore banking wish to regulate its use.
Historically, the U.S. has done little to regulate and enforce laws on offshore accounts. As highlighted by the UBS and Credit Suisse cases between 2009 and 2011, the U.S. government has recently begun regulating offshore bank accounts on a heavier basis. This creates a myriad of legal issues for lawyers dealing with large banks, as they need to ensure the company complies with U.S. regulation wherever they are conducting business. A new provision of the Foreign Account Tax Compliance Act (FATCA) originally passed in 2010 which will take effect in July 2014. This new provision would require foreign financial institutions to report information about their U.S. account holders to the Internal Revenue Service (IRS). This includes both U.S. citizens and U.S. green card holders, no matter where they are living. If you were planning to move to a different country from the U.S and wish to move all your money with you, the IRS will still hold jurisdiction over your accounts.
Defenders of offshore banking have criticized these attempts at regulations. Advocates for offshore banking have proven that there are some legal advantages to offshore banking. The most compelling advantages to offshore banking would have to be its privacy, flexibility and protection from political risks.
The statement on “More regulation is better than less” reflects the impact a financial institution experiences under certain circumstances. Firstly, we look at both pros and cons on why financial regulations were implemented.
Philosopher and educator Paulo Freire once said, “Education either functions as an instrument which is used to facilitate integration of the younger generation into the logic of the present system and bring about conformity or it becomes the practice of freedom, the means by which men and women deal critically and creatively with reality and discover how to participate in the transformation of their world.” In Freire’s work of “the Banking Concept of Concept”, he describes how the education system is failing to help student find success in the real world as well as it provides a framework for the “teachers” to oppress the “students” through the distribution of power.
There are various categories of banking; these include retail banking, directly dealing with small businesses and persons. Commercial and Corporate banking which offers services to medium and large businesses (Koch & MacDonald 2010). Private banking, deals with individuals, offering them one on one service. The last category is investment banking. These help clients to raise capital and often invest in financial markets. Most global banking institutions provide all these services combined. With all these institutions in existence within the same localities and offering similar services, there is a need to regulate the industry so as to protect the consumer and provide fair working environment for all banks (Du & Girma, 2011).
Now, many of these banking groups are owned by foreign investors, despite attempted safeguards. This ownership has provided investors leverage and influence over the actions of the government because the government owes an exorbitant amount to these banks (Daniel Lederman). The same argument can be made about the United States’ government. This influence can be seen across the board as many decisions now seem to favor only a select few, forgetting about the ramifications for the many.
Even though there are many restrictions to what banks can investment in due to the Volcker Rule, there are many loopholes and exemption available for them to take advantage of. For example, MF Global bought risky European government debt, then used those bonds as collateral to borrow more money, and take that borrowed money to buy up more risky European bonds. Even though the Volcker rule restricts trading in European debt, it was able to bypass the system and risk billions of dollars which it ended up losing, in the end, hurting American taxpayers (Gandel). Due to the Volcker Rule, banks are consistently trying to find new loopholes causing they them to purchase different types of debt
Differences in banking regulations across borders permit the most efficient channeling of funds from lenders to borrowers, leading to increased investment and thus increased GDP. Therefore it is imperative that policy makers prudently evaluate the possible consequences and benefits of harmonized banking regulations, as demonstrated by similar regulations instituted domestically, before any such endeavor is embarked upon.
Along with the greater profitability restrictions imposed on banks from the Dodd Frank comes the banks will for greater cost management, meaning job cuts. Already the Banks have begun laying employees off from burdening restrictions leading to this brutal method of retaining necessary capital needed for operations ("Wall Street Journal"). The bigger the bank, the greater resentment they have over this act. Their financial statements will have to retain a greater amount of compliance and transparency as well. Because of the large prominence of “shadow banking” and the concealed balance sheet elements that came along with this practice, the banks now are imposed with greater regulation to prevent these stealthy tactics of borrowing and investing. These restrictions, in my belief, will provide greater protection to the consumer but will also provoke institutions to begin innovating financial instruments to get around barriers, just as they did in the past with interstate banking and early consolidated services even before Glass-Steagalls act. The bankers oppose the act due to their cut in profits. Reduced outlets in revenue from specific revenue generating activities have been capped and larger expenses in order to comply with the new rules have also greatly cut profitability. The same notion is held with brokers. Because of the greater compliance costs served
Firstly, the Dodd–Frank Act pushes forward the reformation of America's financial regulatory system. Several new regulatory authorities are set up to enhance the government supervision and administration of the industry. The Financial Stability Oversight Council is established to identify material risks to financial stability, with the support from Office of Financial Research. Moreover, Fed is entitled to exercise additional superintendence beyond banks.
Please explain your motivation for applying to J.P. Morgan and more specifically for an Internship in Investment Banking. (200 words)*
Benjamin Franklin once famously said in his private correspondence, “…in this world nothing can be said to be certain, except death and taxes”. Benjamin Franklin was correct, taxation is inevitable, but the extent of taxation can be said to be close to nothing when banking offshore. Offshore banking has become a plague in America, crippling small business, enlarging the wallets of top corporations and keeping politicians afloat on a raft of “liquid money”. Not only is this “plague” very selective in its choice of victims, it directly affects the middle to low class, working American dramatically. Offshore banking extorts the basis of United States economics and regulation and should be illegal.
“Opponents of the bank reply that organized labor and major corporations are the kinds of powerful lobbying institutions that can extract special favors from the government. The bank, they say, classifies a lot of big-company business as small business” (Lohr, 2015). Although the Ex-Im Bank states that 90% of their loan recipient are small businesses, they may not actually be that small. Some argue that the bank is not exactly performing the tasks it is there to do and that it is doing more harm than good. Another reason some argue that the Ex-Im Bank should not be reauthorized is the status of the entities receiving the funds. Most of those benefiting from the bank are actually competitors of the United States. However, if the Ex-Im Bank is not reauthorized, there is a good chance many entities would move their production overseas (Ausick, 2015). This would result in a loss of American jobs, as well as several other negative
United States is the first country in terms of money laundering due to strength of its currency. Cayman Islands ,
In the shadow banking system there is an highly important part in the process which is the securitisation process. The securitisation process is a method where illiquid assets are transformed into liquid tradable instruments. In more detail the securitisation process is a method which gives the banks the opportunity to removes the loans from the asset side of their balance sheet meaning that they evenly spread the associated risks to the other financial units. This could be due to the fact that shadow banks are largely unregulated. However during the financial crisis the shadow banking system also helped magnify the risks in the banks balance sheets since after the financial crisis there was an increase in the regulation in the shadowing banking system.
Financial regulation is necessary and without an efficient set of regulations a country could see rises in unemployment, interest rates, and the deterioration of financial intermediaries. With the globalization of the financial industry, it becomes more and more common for businesses to seek financing outside of their county 's boarders. These innovations in the financial industry stress why it is so important for regulations to be created and changed to reduce risk and asymmetric information in financial systems.
Lately, the international financial integration has increased. Over the years, the world economy has witnessed an increase in the number of individuals and businesses using international banking services. In today’s competitive global economy banks have the option to solely service their home market, to export services to foreign markets, or to establish a presence in that market. Essentially, banks have two options of expanding their operations in foreign markets. They can either service foreign clients through their domestic offices or they can establish a presence in the foreign markets. In general, the reasons for bank internationalization in