The Definition of International Banking

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An assortment of international currencies.
An assortment of international currencies. (Image: hammett79/iStock/Getty Images)

In the most basic sense, international banking is any type of banking that takes place across international borders. It's an old practice that originated in the Renaissance as lenders loaned money to foreign kings. In the contemporary world, it's used by individuals and companies seeking favorable banking conditions in a global marketplace.

Defining International Banking

According to the Bank for International Settlements' Committee on the Global Financial System, international banking is when a bank headquartered in one country extends credit to residents of another country -- for example, when a Canadian bank lends money to Americans. According to Eric Philip Davis, a senior researcher at the National Institute of Economic and Social Research in the United Kingdom, it also includes domestic loans made in foreign currencies, as when an American bank issues a loan to an American resident in euros, rather than U.S. dollars. Davis also includes deposits made to foreign banks, as when an American keeps money in a bank in Switzerland or the Bahamas.

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