Many of the international banks were centred in Japan, United States of America (USA) and European Union (EU). Table below shown the list of 10 largest banks in the world as at 31 December 2012, These banks are involved in international commerce on a global scale;
International banking may take many forms. Originally, most of the banking was done through reciprocal correspondent relationships among banks located in different countries. It refers to one bank acts as a correspondent (agent) for another bank in the first bank's home country and vice versa. This relationship was known as Correspondent Relationship. Example; Japanese bank could become the correspondent for a U.S bank in Japan and vice versa. The service provided by correspondent banks include;
- Paying or collecting foreign funds
- Providing credit information
- Honoring letters of credit
In order to facilitate these services, each bank maintains accounts at the other bank denominated in the local currency.
As larger banks have globalised their operations, they have increasingly provide their own oversea operations rather than utilizing correspondent banksin order to improve their competitive advantages. An overseas banking operation can be established in several ways;
- If it was separately incorporated from the parent, it was called Subsidiary Bank
- If it wasn't separately incorporated, it was known as Branch Bank
- If it takes part ownership in conjuction with local or foreign partner, it was known as Affiliated Bank