Q. A bank may establish a multinational operation for the reason of growth. The rationale:

Answer Growth prospects in a home nation may be limited by a market largely saturated with the services offered by domestic banks.

Multinational banks are often not subject to the same regulations as domestic banks. There may be reduced need to publish adequate financial information, lack of required deposit insurance and reserve requirements on foreign currency deposits and the absence of territorial restrictions.

Greater stability of earnings is possible with international diversification. Offsetting trade and monetary policy cycles across nations reduces the country-specific risk of any one nation.

By maintaining foreign branches and foreign currency balances, banks may reduce transaction costs and foreign exchange risk on currency conversion if government controls can be circumvented.