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Offshore Banking Unit

Offshore Banking Unit. What is OBU?. branch of a foreign bank located in an offshore financial centre (OFC).

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Offshore Banking Unit

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  1. Offshore Banking Unit

  2. What is OBU? • branch of a foreign bank located in an offshore financial centre (OFC). • It may accept deposits from other foreign banks and OBUs and make Eurocurrency loans, but may not accept deposits from (or make loans to) the residents of the country in which it is located. • OBUs are otherwise unrestricted in their legitimate activities, and are free from the monetary controls of the country of location.

  3. National Commercial Banking Act 1949 • HSBC • Bank of America • Citibank • Standard Chartered Bank

  4. History in the Philippines • Studies were conducted in order to ‘tap’ the international financial market. • Was expected to improve the access of the country to the world’s financial institutions. • Was envisioned to bolster the growth of the country’s economy. • As of Jan 23, 1976, 28 offshore banks were approved by the Central Bank.

  5. Functions • Transactions with non-residents and/or with other OBU’s. • Transactions with foreign currency deposit units. • Transactions with residents other than FCDU and other OBU subject to prior approval when required under CB regulations, and OBU may invest in foreign currency denominated debt instruments of residents and/or extended foreign currency loans and advances to such residents.

  6. Functions • OBU’s may engage in transactions with resident banks, which are authorised to accept foreign currency deposit- under RA No. 6426; implemented in 1982. • OBU’s in the Philippines are NOT allowed to accept local currency deposits except in HK & SG. • OBU’s are the largest creditors of the Philippines.

  7. Classification According to Form of Organisation • Unit Bank • Branch Banking system • Group Banking • Chain Banking

  8. Unit Bank • Single banking corporation, which makes and implements its own policies. • One place of business • E.g. United States

  9. Branch Banking System • Multiple office banking system. • Banks with branches and extension offices located in various place to extend banking services to other areas of the country. • E.g. Philippines

  10. Branch Banking System • Because we lack capital • Idle funds in one area of the country can be properly employed in other areas • For the convenience of its customers • There is less overhead expense to run a branch than to organise a new bank

  11. Group Banking • Unit banks/branch banks whose majority shares of stick are held by a holding company. • Unit banks resort to group banking in order to control the banking business of a particular territory.

  12. Chain Banking • Independent unit banks, which are owned by a group of people. • Monopoly of the banking business is the main objective of this banking system.

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