FOREIGN EXCHANGE AND INTERNATIONAL TRADE ITS EFFECT ON BANK PROFITABILITY

ABSTRACT

This project is titled foreign exchange and international trade it’s effect on bank profitability. It examines the extent and effect of foreign presence in domestic banking markets. It investigate how net interest margins, overhead tax paid and profitability differ between foreign and domestic banks we find that foreign banks have higher profit than domestic bank in developing countries but the opposite is the case for developed countries. Estimation result suggest that an increased presence of foreign bank is association with a reduction in profitability and margins for domestic banks are regard to foreign exchange and international trade.

CHAPTER ONE

Introduction

1.1 Background Of The Study

In recent decades, international trade in goods and financial services has become increasingly important. To facilitate such trade, many banking institution have also become international.

Foreign exchange market (currency market) is a form of exchange for the global decentralized trading of international currencies. Financial centres around the world function as auchors of trading between a wide range of different types of buyers and sellers around the clock.

The foreign exchange market determines the relative valve of different currencies.

The foreign exchange market assist international trade and investment by enabling currency conversion for example, it permits a business in Nigeria import goods from European union member states especially Eurozone members and pay Euros. Ever through its income is in Nigeria. It also support direct speculation in the valve of currencies and the carry tradE, speculation basat on the interest rate differential between two currencies.

In a typical foreign exchange transaction a party purchases some quantity of one currency by paying some quantity of another currency. The modern foreign exchange market began forming during the 1970s after three decades of government restrict on foreign exchange transaction (the Bretton wood system of monetary management established the riles for commercial and financial relations among the world’s major industries states after world war II) when countries gradually switched to floating exchange rate from previous exchange rate regime which remained fixed as per the Bretton wood system.

The foreign exchange market is unique because of the following characteristics.

Its huges trading volume representing the largest asset class in the world leading to high liquidity.
Its geographical dispersion
The variety of factors that affect exchange rates
Its continuous operation hours a day except weekend i.e trading from 20:15 GMT on Sunday until 22:00 GMT Friday.
The law margins of relative profile compared with markets of fixed income.
The use of leverage to enhance profit and loss margins and with respect to account size.

As such it has been referred to as the market closest to the ideal of perfect competition not withstanding currency intervention by central banks. According to the bank for international settlement as of April 2010, average daily turnover in global foreign exchange market is estimated at $3.98 trillion a growth of approximately 20% over the %3.21 trillion daily volume as of April 2007. Some firms specializing on foreign exchange market had put the average daily turnover in excess of US $4 trillion.

Banks have expanded internationally by establishing foreign subsidiaries and branches or by taking over established foreign banks. The internationalization of the banking section has been spurred by the lateralization of financial market worldwide. Developed and developing countries alike now increasingly allow banks to be foreign owned and allow foreign entry on a nation treatment basis.

Financial liberalization of this kind of proceeds, among other reasons on the premise that the gains from foreign entry to the democratic banking system out weight any losses several authors have addressed the potential benefits of foreign bank entry for the domestic economy in terms of better resource allocation and higher efficiency Levine (1996) specifically mention that foreign bank may:

Improve the quality and availability of financial services in the domestic financial market by increasing bank competition by enabling the greater application or more modern banking skills and technology.
Serve to stimulate the development of the underlying bank supervisory and legal framework.
Enhance a country’s access to international capital. There may also be cost to opening financial market to foreign competition stightz (1993) for instance discusses the potential costs to domestic banks local entrepreneurs and the government resulting from foreign bank entry.

Domestic banks may incur costs they have to compete with larger international bank with better reputation local entrepreneurs may receive less chess to financial service since foreign generally concentrate on multinational firms and government may find their control of the economy diminished since foreign banks tend to be less sensitive to their wishes.

As yet little evidence exist of the effects of an internationalization of the banking sector other than several case studies of foreign bank entry MC Fadden (1994) reviews foreign bank entry in Australia and finds that this has led to improved domestic bank entry operations. Bhattacharaya (1993) reports on specific cases in Pakistan, Turkey, and korea where foreign banks facilitated access to foreign capital for domestic project pigott (19986) describe the policies that have made increased foreign bank activity possible in nine pacific Basin countries and provides some aggregate statistics on the size and scope of foreign banking activities in these markets.

1.2 Statement Of Problem

The statement of problem of the research work is to discuss the effect of foreign exchange and international trade on bank profitability.

1.3 Objectives Of The Study

We the researcher our aims are to provide a systematic study of how banks profit from foreign exchange and international activities.

However, the objective of the study are as follows:

To know the effect of foreign exchange on bank profitability
To know the effect of international trade on bank profitability
To know the size and scope of foreign banking activities.
To know the quality and availability of financial services in the domestic financial market by increasing bank competition.
To know the use of leverage to enhance profit and loss margins and with respect to account size.

1.4 Research Questions

Do foreign exchange affect bank profitability?
Do international exchange affect profitability?
Do foreign exchange and international trade affect the size and scope of foreign banking activities?
Do foreign exchange and international trade affect the quality and availability of financial services in the domestic financial market by increasing bank competition.

1.5 Hypothesis

HI: foreign exchange affect bank profitability
H0: foreign exchange do not affect bank profitability
H2: international trade affect bank profitability
H0: international trade do not affect bank profitability
H3: foreign exchange and international trade affect the size and scope of foreign banking activities.
H0: foreign exchange and international trade do not affect the size and scope of foreign banking activities.
H4: foreign exchange and international trade affect the quantity and availability of financial services in the domestic financial market by increasing bank competition.

1.6 Significance Of The Study

This work will be immense bat to the economy of the country at large. It will serve as a guard to students of banking and finance who wish to carryout the same research. Finally it will of importance to the banking because it proffers ways on how bank can increase their profit through foreign exchange and international trade.

1.8 Definition Of Terms

International Trade:

This may be defined as the exchange of goods and services between two or more countries.

Foreign Exchange:

Is seen as the transfer of bank deposits and credit instruments that serves as a means of international payment.

Bank:

My be defined as a financial institution where money and other valuables are kept for safe keeping.

Bank Profitability:

This may be defined as the money the bank earn from the fees that it charges for its services and the interest that its earn on it’s asset.

…

CHAPTER TWO

2.0 Literature Review

2.1 Introduction

The review of relevant literature is the main topic of this chapter. A literature review covers theoretical and methodological contributions to a certain issue in addition to the state of knowledge at the time of writing. It provides information about the state of the art in relation to the subject you are writing about. It examines the body of work on the chosen subject. The literature evaluation in this study comprises the …

Procedure for Downloading the PDF (Docx) Material

Foreign Exchange and International Trade Its Effect on Bank Profitability can be downloaded by requesting the full set of materials at the project or seminar cost. The document will be sent via Microsoft Word (MS-Word) format via WhatsApp (e-mail) following payment confirmation.

Seminar Material Cost
₦3,000

Project Material Cost
₦5,000

Request Complete Material

Click here to request the Complete Material via WhatsApp including;

Preliminary Pages,
Chapter 1-5,
References and Appendix.

TABLE OF CONTENTS
PRELIMINARY PAGES

Title page
Approval page
Dedication
Acknowledgement
Table of Contents
Abstract
CHAPTER ONE
INTRODUCTION
1.1 Background …
⋮
CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
2.2 Conceptual Review
2.3 Theoretical Framework
⋮
2.4 Empirical Studies
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
3.2 Research Design
3.3 Population of Study
3.4 Sampling and Sampling Technique
3.5 Validation of Research Instrument
3.6 Method of Data Collection
3.7 Method of Data Analysis
3.8 Questionnaire Administration
3.9 Ethical Consideration
3.10 Statistical Analysis
CHAPTER FOUR
DATA ANALYSIS, RESULT AND DISCUSSION
4.1 Introduction
4.2 Presentation and Analysis of Data
4.3 Re-statement of Research Questions
4.4 Test of Hypotheses
4.5 Discussion of Findings
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Introduction
5.2 Summary of Findings
5.3 Conclusion
5.4 Recommendation
5.5 Suggestion for Further Study
REFERENCES
APPENDIX A - “QUESTIONNAIRE”

Disclaimer for Complete Material Utilization
The displayed research work titled "Foreign Exchange and International Trade Its Effect on Bank Profitability" is stated as a research guideline towards accomplishing your assigned project / seminar research work. All the research materials on this website are ONLY for research purposes and should be used as a guideline in developing your research work. For no reason should you copy word for word as projectlist.com.ng will not be liable for any who copied the material. By ordering the complete research guideline, it signifies that you've accepted our terms of service.

Frequently Asked Questions (FAQ)

Can this topic “Microbial Profile of Suya Meat in Ado-Ekiti Metropolis” be used for Microbiology Project?

Yes it can be utilized for research — Suya meat is produced by smoking the raw beet with the addition of some spices, salt, oil, groundnut cake and flavors, the meat is first sliced into smaller pieces and the spices are rubbed onto it, it is later oven dried or over local source of heart. This allows the meat to get dried properly with the right taste before is gold to the consumers. The study determines the Microbial Profile of Suya Meat. In achieving this aim, the following specific objectives were laid out to isolate, microbial species associated with suya meat and identify the microbial species associated with the suya meat. Ten (10) samples of suya meat in Enugu were collected randomly and analyzed microbiologically and the isolates …

Can the material for “Motivation as an Effective Tools for Employee Performance” be used as a guide for Business Administration and Management (BAM) Project?

Yes it can be used — There is an inherent nature in man that desire self-improvement in all ramifications. Therefore an individual who finds himself in an organization where he is contributing his resource to the growth of that organization, would naturally expect something in return. What the organization gives in return goes a long way in determining the level of commitment such an individual would show to the organization. …

Can the material for “Impact of Cash Liquidity on the Performance of Deposit Money Banks in Nigeria” be used as a guide for Banking and Finance (BF) Project?

Yes it can be used — This study examines the impact of cash liquidity on the performance of deposit money banks in Nigeria. Cash liquidity is essential in all banks to meet customer withdrawals, compensate for balance sheet fluctuations, and provide funds for growth. The broad objective of the study is find out the effects of account receivable on financial performance of commercial banks in Nigeria and also to establish the effects of account payable on financial performance of Commercial banks in Nigeria. The primary source of data collection was used and the stratified questionnaire was used to gather relevant information regarding the subject matter. The random sampling method was used to select 50 respondents which serve as the sample size of the study. The chi-square …

Can the material for “Design and Implementation of Currency Converter for Major Countries of the World” be used as a guide for Computer Science (CS) Project?

Yes it can be used — Currency converter is an application that deals with the rate at which a currency is exchanged for another currency. The aim of the study is to design and implement a Currency Converter for Major Countries of the World. In achieving this aim, the following specific objectives were laid out as follows to develop an application software that will determined the accurate amount of paper currency using neural network and enable conversion between the currencies mentioned in the scope of study. The motivation that led to the implementation of the proposed system is that in the existing system, human is needed to recognize the amount of the currency and to convert it manually. This is stressful especially to people who aren’t …

Can the material for “Impact of Planning on Organizational Performance of a Manufacturing Company” be used as a guide for Business Administration and Management (BAM) Project?

Yes it can be used — Effective planning is crucial to management of business enterprise, because it begins with the determination of a business outfit to effectively plan, design, strategize and other tactical ways aimed at achieving set goals and objectives. This work is on the impact of planning on organizational performance of a manufacturing company. It aims are to examine the concept of planning in manufacturing industries as a means of improving productivity, to highlight the role of good plans to effective performance in an organization, to examine the impact of managerial planning in raising the firm’s standard of general work performance, and to improve the quality of production in the organization. The hypothesis formulated were tested with the Chi-square statistical method of analysis. The …

Can this topic “Remedies and Causes of Stealing Among Secondary Schools Students” be used for Guidance and Counselling Project?

Yes it can be utilized for research — Although stealing among adolescents appears to be fairly common, an assessment of adolescent stealing and its relationship to other behaviors and health problems is incompletely understood. A large sample of High School Students (n = 3,999) was examined by self-report survey with 153 questions concerning demographic characteristics, stealing behaviors, other health behaviors including substance use, and functioning variables, such as grades and violent behavior. The overall prevalence of stealing was 15.2 percent (95% confidence interval (CI), 14.8—17.0). Twenty-nine (0.72%) students endorsed symptoms consistent with a diagnosis of DSM-IV-TR kleptomania. Poor grades, alcohol and drug use, regular smoking, sadness and hopelessness, and other antisocial behaviors were all significantly (p < .05) associated with any stealing behavior. Stealing appears to be fairly …

Can the material for “Design and Implementation of a Computerized Market Survey Reporting System” be used as a guide for Computer Science (CS) Project?

Yes it can be used — Market survey is a pivotal part of the marketing process, it helps businesses identify consumer needs and wants so a company can develop and promote products more successfully. The aim of the study is to Design and Implement a Market Survey Reporting System that will report and evaluate market survey to enhance company status in a competitive marketing. In achieving this aim, the following specific objectives were laid out to design and develop an application software that will: deliver quality goods required by the customer the target of achieving maximum customer satisfaction at minimum possible cost, provide important information to identify and analyze the market size, consumers behaviour and periodic sales evaluation, ensure maximum utilization of any available resources in …

Can this topic “Stimulating a Voiced Aided ATM System for Blind and Visually Impaired Customers of Nigeria Banks” be used for Computer Science (CS) Project?

Yes it can be utilized for research — The aim of this project is to stimulate a voiced aided ATM system for blind and visually impaired customers of Nigeria banks that will help them check Balance, change their default PIN, and recharge their mobile phone and Withdraw cash with the following objectives to; design a robust and friendly user interface voice aided ATM system that is easy to use by blind customer with little assistant from bank staff, provide better banking options to blind customer, provide solution alternatives to the operations inherent in the existing system, review existing literature on voice aided ATM system, examine the relevant of adopting a voice aided ATM system, and offer useful recommendations on how to improve on existing ATM systems. The motivation …

Can the material for “Design and Construction of Microcontroller Based Password Door Lock System” be used as a guide for Mechatronics Engineering Project?

Yes it can be used — The Microcontroller Based Password Door Lock System is a design that applies automated security system in homes, Industries, military etc. The aim of the study is to Design and Construct a Microcontroller Based Password Door Lock System. In achieving this aim, the following specific objectives were laid out to provide a cost effective and more efficient security system in areas like homes, industries military etc, the application of this project will enhance effectiveness necessitating to security measures. It relevance, upgrades the conventional security system to automated system that will require little of human intervention, and build a platform for further sophistication of automated security system by detailing all the measures taken in realizing this system (microcomputer Based Security System). Data …

Is the topic “Awareness and Prevention of Malaria in Pregnancy Among Women of Child Bearing Age” recommended for Medical and Health Science Project?

Yes it is highly recommended — The study was carried out to examine the Awareness and Prevention of Malaria in Pregnancy Among Women of Child Bearing Age. Investigation revealed that treating clinical illness in pregnant women who are not immune A serious illness is very likely to strike a pregnant non-immune person. For pregnant women who are not immune, quinine is typically advised as a therapy for P. falciparum. When accessible, artemisinins should be the preferred therapy in locations with significant quinine resistance. The research design used in this report is descriptive design, utilizing questionnaire method to obtain information from the respondents for this project. A total of 80 (eighty) respondents were selected for this study to represent the entire population of the study. Primary data …