International Banking Project: Banco Safra and Currency Risk

This project simulates an international banking scenario involving Banco Safra, a Brazilian bank, and a Brazilian pharmaceutical company investing in Switzerland. The assignment requires an analysis of currency risk management strategies, including foreign exchange contracts, spot and future rates, and the use of capital money markets and stock exchanges. The project addresses the risks associated with the investment, including country risk in Switzerland, and explores the legal and accounting systems, including IFRS. It examines the loan from the Central Bank of Brazil, its repayment terms, and the protection of the country's currency risk through various financial instruments. The project also includes a presentation with slides detailing Banco Safra, the Brazilian financial system, the loan, the pharmaceutical company, and the country risk associated with the investment in Switzerland.

International
Banking and Finance

International Business
International Business can be defined as the
sale and purchase of goods and services,
technology, capital and knowledge across the
international borders or at a transnational level.

Banco Safra
 Banco Safra is a local Brazilian Bank, which ranks tenth among
the largest sector financial institutions of the country, in terms of
total, assets. The bank is a part of the Banks that come under the
larger Safra group of Banks and financial institutions. The history
of the Safra family in the banking sector initiated with the
caravan trade between Alexandria, Aleppo, and Istanbul during
the empire of Ottoman. The family moved to Beirut after the First
World War and then to Brazil in 1952. In the year 2014, Joseph
Safra bought the shares that were remaining of Banco Safra,
Banque Safra Luxemburg and Safra National bank of New York,
from his brother, Moise Safra.

Economic Crisis 1980s
Before the 1980s, the laws limited the
interest rates that the banks and thrifts were
able to offer on the deposits of the savings.
This early 1980 recession was caused mainly
due to the Contractionary Monetary policy of
the Federal Reserve, which was due to the
increase in the inflation rates. During the
reign of the oil crisis 1973, stagflation had
already begun to hit the economy (Pinder,
2017).

Economic Crisis 2007
The effects of the 1980s are seen mostly in
the sectors of the Automotive Industry,
residential and commercial real estate, and
the stock market which has been on a
constant decline since several years. The
main cause behind the rise of the 2008 crisis
was the banking industry being
dereguralised, followed by the failure of
different regulatory bodies to police the
industry in adequately.

Basel I
Basel I is the set of regulations which is put
forward by the Basel Committee on Bank
Supervision (Sbârcea, 2014). These set of
regulations are applicable for all
International banking systems. Basel I is
primarily set up in order to restrict the credit
risk of the banks by setting up a minimum
capital requirements for all the financial
institutions.

Basel II
Basel II expanded and restructured the rules
of capital adequacy that were initiated by
Basel I. Basel II incorporates the credit risk of
the assets in order to determine the capital
ratios (Kinateder, 2016). The Basel II
regulation is on the basis of three important
elements that is, minimum capital
requirements, market discipline and
regulatory supervision.

Basel III
Basel III constitute the set of
regulations which are required to
stabilise the international financial
system (Šútorová & Teplý, 2014).
These regulations are set up to
minimise the excess risk of the
banks which may hamper the
economy.

Credit Risk Management
Credit risk is one of the most important risks for a banking
institution. Credit risk occurs due to failure of a customer to
repay his loan (Brown & Moles, 2014). Sometimes this risk
may occur if a borrower fails to meet his interest payments
in instalments.
Overseas financing
Overseas financing is an important part of international finance
which deals with monetary transaction of two or more countries. The
important elements of international finance are exchange rates,
foreign direct investment, different monetary systems of the world
and other topics associated with financial management of
international countries (Frieden, 2015).

References
Pinder, J. (2017). National industrial strategies and the world economy. Routledge.
Sbârcea, I. R. (2014). International Concerns for Evaluating and Preventing the
Bank Risks–Basel I Versus Basel II Versus Basel III. Procedia Economics and
Finance, 16, 336-341.
Kinateder, H. (2016). Basel II versus III: a comparative assessment of minimum
capital requirements for internal model approaches. Journal of Risk, 18(3).
Šútorová, B., & Teplý, P. (2014). The level of capital and the value of EU banks
under Basel III. Prague Economic Papers, 23(2), 143-161.
Brown, K., & Moles, P. (2014). Credit risk management. K. Brown & P. Moles, Credit
Risk Management, 16.
Frieden, J. (2015). Banking on the world: the politics of American international
finance. Routledge.

THANK YOU