Integration Of International Markets

Business houses no longer restrict themselves to domestic sources of financing. The search for capital does not stop is water edge, with the pursuit of policies for liberalization and globalization; the distinction between domestic and foreign financial markets is becoming increasingly blurred. With the lifting for regulatory systems in 1980s that inhibit competition and protect domestic markets the world had become one vast connected market. In international finance centers or markets, the type of transactions occurring is: (i) between foreign lenders and domestic borrowers; (ii) between domestic lenders and foreign borrowers; (iii) between foreign lenders and foreign borrowers. The third types of transaction are called entrepot or offshore transitions. In this case the financial centers merely provide facilitation services for foreign lending and borrowing.  Until the development of the euro marked in late 1950s internationals financial centers were principal supplier of capital to foreign borrowers. In the post 1960-euro market, entrepot type and offshore financial transactions became increasingly predominant. Hence the traditional nature to financial centers was altered radically. With the internationalization of credit transactions, it was no longer necessary for an international center to be a net supplier of capital. Thus small and relatively unknown parts of the world became important banking centers- Nassau, Singapore, Luxembourg etc., The worlds financial centers as a group provide three types of international services

• Traditional capital exports,
• Entrepot financial services, and
• Offshore banking.

The traditional financial centers were net exporters of domestic capital.

This function has been performed through foreign lending by commercial banks, the underwriting and placement of marketable securities for foreign issuers for foreign issuers and the purchase of notes and obligations of non-resident entities of domestic investors in the secondary markets. Offshore banking is a special kind of business of entrepot financial center. It is financial intermediation performed primarily for non- resident borrowers and depositors.