Can an International Bank Regularly Move Market Prices?

The performance of a large international bank may often be deemed as an indicator for underlying conditions of the economy as a whole. The stability, trading patterns and investments of international banks do affect markets on a regular basis.

While not all international banks will have the same effect on the market as some others, there are some very large international banks that are so intertwined with business and finance around the globe that they have a significant effect on many domestic markets.

How International Banks Affect Markets

The way international bank affects financial markets largely depends on the size and holdings of the particular bank. For example, there are huge banking conglomerates such as Citibank or a Deutsche Bank that have billions of dollars in assets and deposits on hand. Furthermore, these types of huge international banks often have bank branches or subsidiary company branches in many countries in the world.

Typically, these banks are invested heavily in many companies in industrialized countries all over the world, so their fortunes are interlinked with the ups and downs of markets in Japan, Europe, China, and around the globe, not just their own countries.

Additionally, these large international banks have huge interests in the government securities markets in the largest nations. For example, there are several foreign banks which are licensed and registered as the primary market dealers for such securities as U.S. treasury bonds, backed by the U.S. government.

This reality means that the U.S. markets are heavily tied to international banks.

Globalization of Banking

Major upswings or downturns in any particular international bank are going to have repercussions in the markets of not only the country where they are headquarter, but all around the world, due to the complex investment links of all the huge, international banks.

International Banks in the Ordinary Market

Although major up or down swings in the fortunes of international banks do affect foreign markets, during typical market activity, the international banks have much less of an impact on the ups and downs of the markets.

Under normal market conditions, the day-to-day investments and funding from foreign banks do not have a noticeable effect on markets.

However, the potential for an international bank to influence domestic markets is always real. For example, Chinese banks were heavily invested in American securities. At one point, these international banks based in China decided that their holdings were too extensive in the U.S., so they quickly sold off huge numbers of U.S. government securities. This move had an immediate effect on U.S. markets.

Foreign Exchange

Another way international banks affect markets is through their trade in the foreign exchange markets. This unregulated market operates through banks, with the addition of central banks, which act as overseers of the exchange process and sometimes set rates up or down.

This type of trading does have an effect on domestic markets. Even though the central banks that do watch the foreign exchange trade and do step in to make rate changes from time to time are strictly domestic, the international banks that conduct the trading in the foreign exchange market are tied to banks and business worldwide.

International banks can indeed affect domestic markets, and do on a regular basis. With the globally intertwined nature of finance, it is impossible for any one country to be immune from the activity of any of those huge, international banks.


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