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Questions for an International Banker

These are questions which may be appropriate to ask in either choosing an international bank or assessing your current banking relationship.

Table of Contents

1. Foreign Exchange
2. General Questions
3. Letter of Credit Processing
4. Trade Finance
5. Wire Transfers and Other Payment Forms

Foreign Exchange

• How can foreign exchange be used to make an exporter more aggressive on the sales side (i.e. to take on additional risk but mitigate that risk with exchange contracts)?
• Why do companies use foreign exchange rather than U.S. dollars?
• What are the different parts of a foreign exchange transaction?
• What are soft vs. hard currencies?
• What is the difference between the American Bidding Method and the European?
• Could you explain the different types of rates (i.e. spot, forward, etc.)?
• Could you explain hedging?
• What is the effect of a strong U.S. Dollar on exports?

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General Questions

• What kinds of things can an international bank do to help an exporter mitigate risk?
• In which countries do you maintain correspondent / affiliate relationships and with whom?
• What is the normal fee structure for the various services of the bank?
• How can an international bank work with a firm to maximize cash flow (get their money faster)?
• What are different functions carried out by the bank’s International Division? Does the bank have the following functions or use other banks for these functions?
  • letter of credit specialists (export and import)
  • wire transfers and drafts
  • financial analysts for different countries
  • private banking for wealthy individuals
  • foreign exchange sales people
• What are the differences (advantages/disadvantages) between the services a small non-international bank, a small/medium bank with an international division and a money center international bank?
• What is the usual relationship of a non-international bank and an international bank?
• What is the usual relationship between small/medium sized banks and money center banks?
• Does the bank do global treasury (cash management) for multinationals? Can you explain this function?
• What are the daily activities of people who sell the bank’s international services?
• How are foreign cash letters (foreign checks) processed?

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Letter of Credit Processing

• Could you explain the general steps involved in an exporter getting a letter of credit from a foreign buyer?
• When does it make sense for the exporter to go with a letter of credit vs. open account or wire transfer?
• What do you do with the documents once the LC is reviewed?
• What is the process of reviewing a letter of credit and comparing it to the shipping documents?
• What are the most often types of LC discrepancies?
• How is an extension obtained for a letter of credit?
• What happens if there are discrepancies in a letter of credit?
• What do you do when you encounter a boycott statement in a letter of credit?
• How many copies of documents are usually presented with the letter of credit?
• How are amendments made to letters of credit?
• How long do banks usually have to process documents?
• If a client uses a letter of credit for a bid or performance bond, how does that work? Are there any problems related to that?
• How does the complexity of a letter of credit add risk to a transaction?
• Please explain the process of confirming another bank’s letter of credit.
• How does getting documents prepared quickly affect a transaction?
• What screening do banks do to avoid processing payment to companies on the Office of Foreign Assets Control lists?

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Trade Finance

• What are the most often used trade finance options?
• What is the bank’s relationship with government trade finance programs?
• What are alternative trade finance options other than Eximbank, SBA or State Guarantees?

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Wire Transfers and Other Payment Forms

• How does a wire transfer work?
• What issues impact a bank’s effectiveness in collecting cash or making wire transfers?
• What problems are encountered by banks in wire transfer transactions?
• When a wire transfer is not completed in a timely manner, what is the tracking process?
• How are drafts processed?
• What problems have companies experienced by using collections as the form of payment?

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Date Updated: March 27, 2007